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The main reason was a shift in interest-rate expectations.
- Softer inflation data (both CPI and PPI) led investors to believe the Federal Reserve is less likely to raise interest rates soon.
- Stocks rose because lower expected interest rates generally increase the value of future corporate earnings, especially for growth and technology stocks. Strong earnings from several large financial companies also helped sentiment.
- The U.S. dollar weakened because if the Fed is expected to keep rates lower, dollar-denominated investments become a little less attractive relative to other currencies.
- Treasury yields also fell, reinforcing the move into stocks and away from the dollar.
One interesting point is that Middle East tensions would normally support the dollar as a safe-haven currency, but on this day the market focused more on the inflation and interest-rate news than on the geopolitical risk.