Stocks rallied higher on Tuesday, propelling the month's gains higher, as optimism towards the Federal Reserve ending its interest rate hiking campaign entered Wall Street following another softer-than-expected inflation report. The Dow Jones Industrial Average soared nearly 490 points, while the S&P 500 Index and Nasdaq Composite added 1.9% and 2.4%, respectively.

Here's how the market settled on Tuesday:

S&P 500 Index (SPY  ): +1.91% or +84.15 points to 4,495.70

Dow Jones Industrial Average (DIA  ): +1.43% or +489.83 points to 34,827.70

Nasdaq Composite Index (QQQ  ): +2.37% or +326.64 points to 14,094.38

Driving Tuesday's rally, October's consumer price index (CPI) came in lower-than-expected, the Labor Department reported. Headline CPI rose 3.2% from a year ago and was unchanged month-to-month in October, marking a slowdown from September's monthly increase of 0.4%. Core CPI, which excludes food and energy prices, also came in below expectations at an increase of 0.2% on the month and 4% annually.

While October's CPI reading is still well above the Fed's 2% target, market participants anticipate the central bank will hold interest rates at their current level of 5.25% to 5.50% at their next and final meeting of the year in December, according to CME Group's FedWatch tool.

Chicago Fed President Austan Goolsbee said in prepared remarks for a Detroit Economic Club on Tuesday that while inflation is cooling at a near-record pace, policymakers still have more work to do.

"Progress continues, though we still have a way to go," Goolsbee said. "In 2023, we may equal or even surpass that one-year mark for a fall in CPI inflation. And we may do that with an unemployment rate that never gets above 4 percent."

On the earnings front, Home Depot (HD  ) reported stronger-than-expected third-quarter earnings results, but offered weak guidance as customers slowed down with home improvement projects. For the year, Home Depot expects sales to fall by 3% to 4% year-over-year and earnings-per-shares to decline by 9% to 11%.

"A customer who might have remodeled their entire home may be opting for a partial remodel," CFO Richard McPhail told CNBC in an interview on Tuesday. "Maybe they won't redo their entire kitchen. Maybe they'll just do the countertop and backsplash. And so it's really just the downscaling of projects that we've seen."

In single-stock news, Amazon (AMZN  ) was in the news on Tuesday following a report from The Information that the e-commerce giant will allow people to buy products advertised on Snapchat (SNAP  ). Separately, the company's Amazon Web Services business announced an expansion of its strategic collaboration agreement with C3.ai (AI  ), allowing for the two companies to offer generative AI solutions for businesses.

For Wednesday, investors will react to October's producer price index and U.S. retail sales readings, as well as earnings reports from companies including Target (TGT  ) and JD.com (JD  ).