US stocks closed up sharply on Tuesday on the news that US inflation cooled by more than expected last month, fuelling hopes of an end to interest rate hikes.

The US Federal Reserve voted last month to hold rates steady at a 22-year high for the second consecutive meeting as policymakers look to bring down inflation while avoiding a damaging recession.

Consumer inflation in the United States increased by 3.2 percent in the 12 months to October, down from 3.7 percent a month earlier, according to the Labour Department.

So-called "core inflation" – stripping out volatile food and energy prices – also slowed to an annual rate of 4.0 percent.

The below-target core and headline inflation figures fuelled hopes that the Fed is done hiking interest rates, which is often good news for stock markets.

The Dow Jones jumped 1.4 percent to finish at 34,827, while the S&P 500 Index jumped 1.9 percent to 4,495.

And the Nasdaq surged 2.4 percent to 14,094.

"The market has essentially removed any probability for any more rates hikes," said Steve Sosnick from Interactive Brokers.

"It's hard to find anything that is not joining the party," he added.

Among individual stocks, Home Depot closed up 5.4 percent, while Solaredge was up 10.8 percent. (AFP)