Raindrops hang on a sign for Wall Street outside the New York Stock Exchange in New York
Raindrops hang on a sign for Wall Street outside the New York Stock Exchange in Manhattan in New York City, New York, U.S., October 26, 2020. Reuters

Wall Street's main indexes were set to open sharply higher on Thursday as data showed consumer prices increased less than expected in October, spurring hopes that the Federal Reserve might scale down the size of its future interest rate hikes.

The Labor Department said consumer prices advanced 7.7% in the 12 months through October, after rising 8.2% at the end of September, while the core rate, which excludes volatile food and energy prices, increased 6.3% on a year-on-year basis last month, from 6.6% in September.

Economists polled by Reuters had expected the CPI and core number to rise 8% and 6.5%, respectively.

"A softer-than-expected inflation report is acting as a tailwind for markets. Every line of the report shows sequential improvement," said Art Hogan, chief market strategist at B. Riley Financial.

The report prompted traders to adjust their rate hike bets, with bets of a 50-basis point rate hike in December jumping to more than 70% from 45% before the data was released.

Following last week's Fed policy meeting, some U.S. central bank officials have made comments that pointed to slower rate rises over coming meetings.

However, they also signaled that the final stopping point for the tightening campaign could be higher than the 4.6% policy makers penciled in just a couple months ago.

The Fed's policy rate is currently in a range of 3.75%-4.00%.

At 8:42 a.m. ET, Dow e-minis were up 759 points, or 2.33%, S&P 500 e-minis were up 108.75 points, or 2.9%, and Nasdaq 100 e-minis were up 407.5 points, or 3.76%.

Rate-sensitive technology stocks rallied, with Microsoft Corp, Apple Inc <AAPL.O>, Amazon.com Inc, Meta Platforms Inc, Tesla Inc and Nvidia Corp up between 3.9% and 5.8% in premarket trading.

Meanwhile, Republicans edged closer to securing a majority in the U.S. House of Representatives while control of the Senate hinged on a few tight races, two days after Democrats staved off an anticipated "red wave" of Republican gains in midterm elections.

Rivian Automotive Inc jumped 14% in premarket trading after the electric-vehicle maker reported a smaller-than-expected loss, higher number of preorders and reaffirmed its full-year production outlook.

Tapestry Inc dipped nearly 1% after the luxury handbag maker cut its annual sales and profit forecasts.

Online dating firm Bumble Inc slid 6.8% after it forecast downbeat fourth-quarter revenue.

The CBOE volatility index, also known as Wall Street's fear gauge, fell to a near two-month low of 23.94.points.