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In a significant turn of events, U.S. stocks concluded Tuesday's trading session at the highest levels of the year. Despite the release of inflation data, which had minimal impact on expectations for an imminent rate cut by the Federal Reserve, investors eagerly anticipated the central bank's final policy decision of the year scheduled for Wednesday.

The November Consumer Price Index (CPI) exhibited a 3.1% annual increase, aligning with projections from economists surveyed by Reuters. This modest rise was attributed to a decline in gasoline prices being offset by an upswing in rents. Core prices, excluding volatile elements like food and energy costs, also met expectations, displaying a 4% annual surge.

On a month-to-month basis, consumer prices inched up by 0.1% last month, contrasting with predictions of remaining unchanged.

Recent market sentiments had factored in a potential rate cut by the Federal Reserve as early as March. However, following the data release, traders adjusted their expectations, with May now emerging as the projected timing for the first rate cut since the central bank commenced its hiking cycle in March 2022.

Anticipation of a cut of at least 25 basis points in March receded to 43.7%, down from around 50% before the data release, as per the CME Group's FedWatch Tool. The market is presently estimating a 78% likelihood of a cut in May, up from approximately 75% on Monday.

Scott Wren, senior global market strategist at the Wells Fargo Investment Institute in St. Louis, remarked, "The market is certainly assuming that inflation is going to keep coming down, that earnings in this next year are going to show some decent growth and the Fed is going to cut rates. The market is counting on more of a soft landing that would allow the Fed to ease up."

The Dow Jones Industrial Average (.DJI) climbed 173.01 points, or 0.48%, reaching 36,577.94, the S&P 500 (.SPX) gained 21.26 points, or 0.46%, closing at 4,643.70, and the Nasdaq Composite (.IXIC) advanced 100.91 points, or 0.70%, settling at 14,533.40.

Wren noted that stocks faced resistance at their yearly highs, expressing skepticism about a robust upward trend in the near-to-intermediate term.

Another factor contributing to subdued volatility was an upcoming options expiration at the end of the week. The S&P 500 had not experienced a move of 1% in either direction for 19 consecutive sessions, marking the lengthiest such streak since August.

Market participants eagerly anticipated the Producer Price Index (PPI) for another insight into inflation trends before turning their attention to the Federal Reserve's policy announcement at the conclusion of its two-day meeting on Wednesday. Additionally, the European Central Bank and the Bank of England are slated to deliver their policy decisions later in the week.

Oracle (ORCL.N) witnessed a significant decline of 12.44% after forecasting third-quarter revenue below estimates due to slowing demand for its cloud service.

Among the 11 major S&P sectors, Energy (.SPNY) emerged as the worst-performing, falling by 1.35% as crude prices settled nearly 4% lower. Conversely, the tech sector (.SPLRCT) stood out as one of the best-performing, registering its fourth consecutive session of gains to close at a record high of 3,344.07, on track for its most substantial yearly percentage gain since 2019.

Google-parent Alphabet (GOOGL.O) experienced a dip of 0.58% following Epic Games' victory in its high-profile antitrust trial against the company.

While advancing issues were roughly even with decliners on the NYSE, declining issues outnumbered advancers by a 1.3-to-1 ratio on the Nasdaq.

The S&P 500 posted 74 new 52-week highs and 2 new lows, while the Nasdaq recorded 198 new highs and 187 new lows.

Trading volume on U.S. exchanges amounted to 10.52 billion shares, slightly below the 10.95 billion average for the full session over the last 20 trading days.