Stocks on Wall Street rose on Wednesday, U.S. Treasury prices strengthened and the dollar weakened as traders looked back at past data showing U.S. inflation has reached its highest level in nearly 40 years to focus on expectations that price gains will soon peak.

The blue-chip S&P 500 rose 0.4% in early New York trade, while its information technology subindex gained 1%. The tech-heavy Nasdaq Composite rose 0.8%.

The dollar fell against the pound, the euro and the South African rand, while an index that measures the greenback against six other currencies was down about 0.4%.

Meanwhile, the yield on the benchmark 10-year U.S. Treasury note, which is inversely related to its price, fell 0.03 percentage point to 1.72%. The two-year Treasury yield, which is closely related to interest rate expectations, was also steady at 0.9%.

Data from the Labor Department on Wednesday showed U.S. consumer prices rose 7% in December from a year earlier, up from a 6.8% annual increase in November. Its December gain was the largest since June 1982, but in line with analysts’ expectations.

Prices rose 0.5% in December from November, slightly faster than the 0.4% forecast by Wall Street economists.

“It’s a bit counterintuitive, to be sure, although there is a strong argument that investors are ready for a more drastic reaction,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.

Federal Reserve Chairman Jay Powell pledged in testimony before the Senate Banking Committee on Tuesday that the central bank will tackle high inflation and forecast supply chain problems will ease this year and price increases will slow.

After the data, traders continued to bet that the Fed would raise rates three or four times this year to about 1%.

These calculations – implied by the swap market and based on a widely held view that the current high inflation rate will fade away as bottlenecks in global supply chains caused by economic disruptions caused by coronavirus lockdowns begin to unwind – are invested in Quoted as support for the stock market.

Despite a tumultuous start to the year, with the S&P 500 falling in five of seven sessions and the Nasdaq Composite briefly pulling back, the S&P ended Tuesday about 1.7% below its all-time high.

“Yes, easing is coming,” State Street macro strategist Tim Graff said ahead of the inflation data. “But will that have a meaningful impact on the financing environment for households and businesses?” he added. “We don’t think so.”

Investors say U.S. and European stocks can afford higher borrowing costs as long as the strength of the economy boosts corporate earnings and inflation peaks.

“The fourth-quarter earnings season could also provide a catalyst for the next rally,” said Luca Paolini, chief strategist at Pictet Asset Management.

If higher inflation expectations lead to 10 years Treasury yield, which in turn could lower the fee investors pay for every dollar of the company’s future cash flow, “then the stock will struggle,” he said.

Elsewhere, the Stoxx Europe 600 gained 0.7% and London’s FTSE 100 gained 0.9%. Hong Kong’s Hang Seng closed up 2.8 percent, as its tech index posted its biggest one-day gain since October.