U.S. stocks reached new heights on Friday as cool inflation data raised investors' optimism that the Federal Reserve can stay on its rate-cutting path, boosting the economy and justifying higher valuations for equities.

The Dow Jones Industrial average rose 407 points, or about 0.9%. The S&P 500 also added 0.9%, while the Nasdaq Composite climbed 1.2%. All three major averages reached new all-time intraday highs in the session.

The September consumer price index report — which was delayed because of the U.S. government shutdown — rose 0.3% on the month, bringing the annual inflation rate to 3%, according to the Bureau of Labor Statistics. That's just below the 0.4% and 3.1% that economists polled by Dow Jones had expected. When excluding food and energy, core CPI came in at 0.2% last month and 3% on a 12-month basis, also lighter than the Dow Jones forecasts for 0.3% and 3.1%, respectively.

Following the CPI data, traders increased their bets that the Fed will cut rates at both its remaining two meetings this year. Odds for a December cut initially jumped to 98.5% from roughly 91% odds before the data, per the CME FedWatch tool. Odds for a cut next week remained above 95%.

Source: CNBC