After the release of November's Consumer Price Index (CPI) data in the United States on Wednesday, investors seem to have reached a consensus: a Federal Reserve interest rate cut is virtually a done deal for next week.

Analysis of short-term interest rate futures pricing indicated that by Wednesday, there was over a 95% chance of the Fed reducing rates by 25 basis points this monthAs a result, the financial markets across various asset classes exhibited particularly vigorous movements, with the exception of a decline in U.STreasury yieldsInvestors responded passionately, pivoting to buy into nearly every market: U.Sstocks surged, gold prices increased, the dollar strengthened, oil prices gained, and cryptocurrencies rallied.

Among the standout performers, the holders of technology stocks appeared to experience the most exuberant reactionOn Wednesday, the Nasdaq Composite Index soared above the crucial 20,000-point mark for the first time, driven by the hype surrounding artificial intelligence (AI) and expectations for declining interest rates, leading to a phenomenal uptick in tech stocks and adding exclamation marks to a thrilling year for the index.

The Nasdaq closed at 20,034.89 points on Wednesday, reflecting a rise of 1.8%. The impressive performance was bolstered by technology giants like Apple, Nvidia, Alphabet (Google's parent company), and electric vehicle manufacturer Tesla

The index has now gained over 33% year-to-date, marking a significant recovery phase for the tech sector.

Current valuations, however, indicate that the Nasdaq still has some distance to cover compared to the peak levels observed during the late 1990s internet bubbleAccording to data from LSEG Datastream, the current price-to-earnings (P/E) ratio for the index stands at about 36, the highest it has been in the past three yearsWhile this represents an increase over the long-term average of 27, it remains comfortably below the staggering P/E ratio of around 70 during March 2000, calming some investor anxieties when comparing the two historical periods.

Jessica Rabe, co-founder of DataTrek Research, highlighted in a report on Wednesday that "the recent rise in the Nasdaq pales in comparison to the experience of the late '90s and early 2000s; the increase has been more gradual and seems sustainable." Rabe's assessment suggests a level of cautious optimism about the sustainability of the current market rally.

Spartan Capital Securities' Chief Market Economist, Peter Cardillo, noted the remarkable surge in the Nasdaq, attributing it directly to the anticipated Fed rate cut next week, and asserted that there is still room for the index to climb further.

Additionally, commodities experienced notable climbs overnight

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The spot price of gold rose by 0.9% to $2,717.29 per ounceCommenting on the trends, David Meger, head of metals trading at High Ridge Futures, stated, "The rise in gold prices is underpinned by modest CPI data, which indicates stable inflation, thus making it almost certain that the Fed will cut rates in the next FOMC meeting."

Oil prices also increased significantly, gaining over $1, influenced by new sanctions from the European Union targeting Russian oil exports, likely tightening global crude suppliesSpecifically, Brent crude futures settled at $73.52 per barrel, marking an increase of $1.33 or 1.84%, while the West Texas Intermediate (WTI) crude futures rose by $1.70, representing a 2.48% increase, to close at $70.29 per barrel.

Clearly, with the release of the nonfarm payrolls and CPI data, next week's Fed rate cut has practically become a certaintyThe positive movements in risk assets and commodities align with those expectations

However, what was particularly intriguing was the simultaneous rise in U.STreasury yields and the dollar index along with these risk-sensitive assets.

On Wednesday, the dollar index closed up about 0.32% at 106.7 pointsMost maturities of Treasury yields also saw a notable increase (indicating pressure on bond prices), with the 2-year yield up by 0.9 basis points to 4.162%, the 5-year yield rising by 3.8 basis points to 4.14%, the 10-year yield climbing by 4.7 basis points to 4.276%, and the 30-year yield increasing by 6.3 basis points to 4.483%.

Typically, expectations of interest rate cuts would lead to a decrease in both the dollar index and Treasury yieldsYet, amidst the asserts of the day, while dollar and bond rates indeed experienced pressure during trading, they ultimately recorded gainsThis points to a potential divergence in market focuses between the currency and bond markets in comparison to other asset classes.

From a quantitative standpoint, the latest CPI data released by the U.S

Department of Labor on Wednesday was entirely in line with expectations, reinforcing traders' predictions that the Fed will lower interest rates by 25 basis points next weekThat said, as the previous values trended upward, there exists a degree of constraint on the Fed's capacity to cut rates further in the following year.

The report revealed that nominal CPI rose 0.3% month-over-month and 2.7% year-over-year, each up by 0.1 percentage points compared to October's levelsNotably, this is the first time nominal CPI has shown consecutive month-over-month increases since MarchMeanwhile, the core CPI, which excludes the volatile prices of food and energy, also rose 0.3% for the fourth straight month and held steady at an annual increase of 3.3%.

As expectations rise for a Fed rate cut in December, there appears to be a compression in the magnitude of potential cuts expected moving into next year.

Brian Jacobsen, chief economist at Annex Wealth Management, concluded that with the employment and inflation reports now available, nothing seems to hinder the Fed from implementing the anticipated 25 basis point cut next week