S&P 500 notches best day since April, Dow leaps nearly 500 points on soft inflation report:

Oil settled flat Tuesday as traders weighed signs that Middle East tensions may be easing against higher crude demand forecasts.

Brent crude contracts for January fell 5 cents to settle at $82.47 a barrel, while U.S. West Texas Intermediate contracts for December held steady at $78.26.

There were some signs that Middle East tensions may ease with President Joe Biden saying he believes a deal can be reached to free hostages taken by Hamas. Fears that the Israel-Hamas war could spread had sent crude prices higher in mid-October.

Crude prices rose earlier in the day after the International Energy Agency boosted its crude demand forecasts and cooling U.S. inflation strengthened the case that the Federal Reserve may be done hiking interest rates.

— Spencer Kimball

Tuesday’s stock market rally — sparked by lower Treasury yields themselves led lower by weaker-than-forecast October inflation — has been exceptionally broad and deep, touching areas of the market that have lagged all year.

For example, 91% of all the volume on the New York Stock Exchange advanced in price, while just 9% declined. On the Nasdaq, it was 85% up vs 15% down. Similarly, nine out of 10 NYSE stocks rose while advancers outpaced decliners on Nasdaq by 7 to 3. New highs swamped new lows on the NYSE by 6 to 1.

The SPDR S&P Regional Bank ETF that was decimated in the spring after Silicon Valley Bank failed, soared 7.6%. Western Alliance Bancorp jumped 10.5%; PacWest Bancorp by 9.9%

The S&P 500 Real Estate Index, previously hurt by concerns surrounding commercial real estate loans in 2023, bounced back 5.5% — the strongest of the S&P’s 11 main sectors on the day. The Russell 2000 index of smallcap stocks climbed 5.2% — more than double the 2.1% advance in the S&P 500.

— Scott Schnipper

Abbott shares are up in trading Tuesday after it posted the results of study it conducted with patients who have type 2 diabetes and take a GLP-1 drugs like Novo Nordisk’s Ozempic. These patients had struggled to lower their HbA1c levels, but after using Abbott’s Libre continuous glucose monitor saw improvements in this important metric.

Abbott’s data is the latest to be released from manufacturers of CGM devices that make the case that GLP-1 drugs can co-exist with the monitoring devices.

Sentiment does appear to be shifting this week, with medical device stocks clawing back recent losses in trading. Other beaten up names like Insulet and Tandem Diabetes Care were logging even bigger gains of nearly 5% and 16%, respectively.

In a research note about Abbott’s study, Bank of America analyst Travis Steed reiterated his buy rating on Abbott shares saying, “estimates for 2024 seem derisked and ABT’s gross margin expansion gives room for upside along with its balance sheet.”

—Christina Cheddar Berk

Real estate stocks in the S&P 500 outperformed on Tuesday as the index saw a broad rally.

The sector jumped more than 5%, making it the best performing of the 11 that make up the broad index. Consumer discretionary and utilities saw the next largest gains, with each up more than 3%.

To be sure, it was a broad rally with all 11 sectors trading higher. The S&P 500 as a whole was up 2% on the day.

Real estate led in part from rallies of more than 10% in Alexandria Real Estate Equities and Boston Properties. Every stock in the sector advanced notably in the session.

— Alex Harring

Inflation is dropping this year at a near-record pace, but more progress needs to be made, Chicago Federal Reserve President Austan Goolsbee said Tuesday.

This year may be the quickest cooling, outside of wartime, while there is full employment, he said in remarks prepared for a Detroit Economic Club event Tuesday. Goolsbee is the first Fed official to react to Tuesday’s consumer price index report, which was flat month over month in October.

Improvements in supply and accelerating productivity drove the declines, he said.

“Progress continues, though we still have a way to go,” Goolsbee said. “In 2023, we may equal or even surpass that one-year mark for a fall in CPI inflation. And we may do that with an unemployment rate that never gets above 4 percent,” he added.

Goolsbee said the U.S. can have strong growth without inflation due to the unwinding of supply shocks. The key to further cooling of inflation will be housing, he said.

— Michelle Fox, Jeff Cox, Steve Liesman, Reuters

The latest rally for software stocks is pushing a major fund to its highest level in nearly two years.

On Tuesday, the iShares Expanded Tech-Software ETF (IGV) hit its highest level since January 2022.

The fund has nearly $7 billion in assets under management. Its top holdings include Microsoft, Adobe and Salesforce.

— Jesse Pound

Michael Burry’s Scion Asset Management added a potential new bet against a major chip stock fund during the third quarter, according to a securities filing released Tuesday.

The move comes after Burry made bets against the S&P 500 and Nasdaq 100 earlier this year. He closed those bets during the third quarter.

Read more about Burry’s latest move on CNBC Pro.

— Jesse Pound

Check out some of the companies making headlines in midday trading.

V.F. Corp – Shares of the apparel company, which owns Timberland and The North Face, gained 12%. The move occurred a day after V.F. Corp disclosed in a regulatory filing that director Matthew Shattock purchased 20,000 shares of the company, valued at more than $291,000 in total.

Amazon, Snap — Stock in the e-commerce giant climbed 2%. The action came a day after The Information reported that Amazon would allow people to buy products advertised on Snapchat. Shares of Snap climbed more than 7%.

C3.ai — Shares added more than 7% in midday trading. C3.ai announced the expansion of a strategic collaboration agreement with Amazon Web Services. The partnership allows the two companies to offer generative AI solutions for businesses.

Read the full list here.

— Brian Evans

Solar stocks are surging after U.S. inflation cooled in October and Treasury yields dropped.

The Invesco Solar ETF that tracks the industry is up nearly 9%.

The inverter manufacturers Enphase and SolarEdge surged more than 13% and 10% respectively, while the installers SunPower, Sunnova and Sunrun jumped more than 13%, 16% and 18%. Panel manufacturer First Solar jumped more than 10%.

U.S. consumer prices were flat in October compared to the month prior, strengthening the case that the Federal Reserve will is one raising interest rates. The 10-year Treasury yield tumbled below 4.5% on the inflation data.

High interest rates have slammed the residential solar industry this year, dramatically softening consumer demand and leaving companies saddled with inventory.

— Spencer Kimball

The market is in a celebratory mood after the consumer price index reading Tuesday morning and could be readying for an end-of-year climb, said Gina Bolvin, president of Bolvin Wealth Management Group.

“We need to see more months with soft inflation data, but the stock and bond market is celebrating today,” Bolvin said. “We’re set up nicely for a year-end rally.”

Similarly, AXS Investments CEO Greg Bassuk called the data an “early holiday present” for investors unclear about what the Federal Reserve will do with interest rates for the remainder of 2023.

The data “is being cheered by Wall Street and Main Street alike, as a Fed move from hawkish to dovish interest rate policy is just the holiday gift coveted by investors,” Bassuk said.

“October’s cooler CPI data, combined with a slowing but resilient economy, bodes well for the economy’s soft landing, while positioning 2024 for lower interest rates and the prospects for robust stock market growth,” he added.

— Alex Harring

A pullback for stocks could be on the horizon after a unique technical signal was flashed, BTIG said.

Last week, the tech-heavy Nasdaq 100 closed less than 5% below a 52-week high, while the small cap Russell 2000 index closed less than 5% above a 52-week low — an occurrence BTIG called “extremely rare.” The Russell 2000 ended last week down 3.2%, while the Nasdaq 100 gained 2.9%. Historically, this extreme bifurcation hasn’t been good for the market.

“This is often a sign of crowding as the NDX is a cap-weighted index of just 100 large-cap names, while the RTY is more equally weighted of 2k smaller companies,” BTIG chief market technician Jonathan Krinsky wrote in a note.

CNBC Pro subscribers can read more here.

— Pia Singh

The Fed appeared justified in its interest rate cycle after the latest consumer price index reading, according to Bryce Doty, senior portfolio manager at Sit Fixed Income Advisors.

“The Fed looks smart for effectively ending its tightening cycle as inflation continues to slow,” he said. “Yields are down significantly as the last of investors not convinced the Fed is done are likely throwing in the towel.”

— Alex Harring

Tuesday’s rally propelled the Technology Select Sector SPDR Fund (XLK) to an all-time high.

The ETF, which tracks technology stocks in the S&P 500, climbed more than 1%, pushing the price above $181. That marks its most expensive ever, despite trading close to the level earlier this year and in 2021.

Part of Tuesday’s gain is due to an advance among solar stocks. SolarEdge and Enphase led the fund higher with rallies of more than 10% each. With a jump of more than 8%, First Solar was the next best performer.

Outside of solar, ON Semiconductor and EPAM Systems were also among the biggest winners with each stock adding more than 5%.

Motorola Solutions was the only stock in the ETF trading down in Tuesday’s session.

— Alex Harring

Advancers at the New York Stock Exchange held a wide lead over decliners Tuesday, as traders cheered the latest inflation data. There were 15 advancers for every decliner at the NYSE. In other words, about 2,550 NYSE-listed names were higher, while just 160 fell, FactSet data shows.

— Fred Imbert

The Cboe Volatility Index (VIX) hit a low of 13.91 on Tuesday, a level not seen since Sept. 20. The move on Wall Street’s preferred fear gauge comes after a softer-than-expected U.S. inflation report.

Oil price rose more than 1% as inflation cooled in the U.S. month over month and the International Energy Agency raised its crude demand forecast.

Brent crude contracts for January rose $1.06, or 1.28%, to $83.58 a barrel, while West Texas Intermediate contracts for December increased $1.02, or 1.30%, to $79.28 a barrel.

Consumer prices in the U.S. were flat in October from the previous month, strengthening the case that the Federal Reserve is done raising interest rates. Higher rates can slow economic activity and hit crude demand.

The IEA also raised its 2023 crude growth forecast to 2.4 million barrels per day from 2.3 million barrels. The agency increased its 2024 growth forecast to 930,000 barrels per day from 880,000 previously.

— Spencer Kimball

Markets have almost completely taken off the table any chance that the Federal Reserve will raise interest rates again this cycle.

Following Tuesday morning’s inflation report indicating that prices were broadly unchanged in October from the previous month, traders in the futures market were assigning just a 5% probability to a hike at the central bank’s December or January meetings, according to the CME Group’s FedWatch gauge of futures pricing.

The probability for a December hike was around 14% and 25% for January prior to the consumer price index release.

Instead, futures pricing now points to the Fed’s next move as a cut, coming as soon as the May meeting.

—Jeff Cox

The U.S. dollar index fell 1% on Tuesday after the latest consumer price index came in weaker than expected.

The dollar index, which measures the currency against a basket of six others, hit a low of 104.54 in morning trading.

— Michelle Fox