Wall Street recorded its largest daily gains in more than two years on Thursday, as investors anticipated a less hawkish Federal Reserve (Fed) following the release of softer-than-expected inflation data for October. 

The Dow Jones Industrial Average on Thursday rose 3.70 percent to 33,715.37, the S&P 500 increased 5.54 percent to 3,956.37, and the Nasdaq Composite Index spiked 7.35 percent to 11,114.15. All three major indexes notched their largest single-day rally since 2020.

The U.S. Labor Department reported Thursday that the country's CPI rose 0.4 percent in October over the previous month, below the 0.6 percent consensus, resulting in a 7.7 percent year-on-year increase. 

The data cheered traders and prompted them to adjust rate hike bets, with odds of a 50-basis point rate hike in December, rather than a 75-basis point hike, jumping to about 85% from 52% before the data was released, according to the CME FedWatch tool.

Nevertheless, the data also showed that Americans continue to suffer from high living costs, as food prices rose 10.9 percent year on year, and energy prices surged 17.6 percent over the previous year.

A separate Labor Department report Thursday showed that initial jobless claims in the week ended November 5 increased to 225,000, higher than market expectations and an increase of 7,000 from the previous week's level, but still remained near historically low levels. 

The strong job market has been a challenge for the Fed, who's trying to bring down historic inflation and cool the economy.  

(With input from Reuters)