Wall Street enjoyed a rally on Wednesday, with stocks soaring after the latest Consumer Price Index (CPI) report showed inflation easing in December. Adding to the optimism, major U.S. banks kicked off the quarterly earnings season with stellar results, fueling investor confidence.
Market Snapshot: Strong Gains Across the Board
- Dow Jones Industrial Average surged 655 points, or 1.5%.
- S&P 500 climbed 1.6%.
- Nasdaq Composite rallied 2.2%.
The positive sentiment was driven by cooling inflation and strong performance from leading financial institutions.
Inflation Eases: December CPI Report Highlights
The Bureau of Labor Statistics revealed a 3.2% rise in core inflation for December, slightly below economists’ expectations of 3.3%. This marks a decline from the previous month, offering a glimmer of hope for inflation-weary markets.
Headline inflation rose by 2.9% on a year-over-year basis, aligning with forecasts and signaling a gradual easing of price pressures.
John Kerschner, head of U.S. securitized products at Janus Henderson Investors, summarized the market’s mood:
“The market [is] breathing a sigh of relief as back-to-back inflation gauges, PPI yesterday and CPI this morning, came in slightly below expectations. Perhaps most importantly, today’s CPI number takes additional rate hikes off the table.”
Treasury Yields Drop, Growth Stocks Surge
The CPI report caused a sharp drop in the 10-year Treasury yield, which fell by 14 basis points to 4.651%. Lower yields provided a boost to growth stocks:
- Tesla soared 5%.
- Nvidia climbed 2%.
The drop in yields reflects investor optimism about easing monetary tightening from the Federal Reserve.
Banks Kick Off Earnings Season with a Bang
The fourth-quarter earnings season began on a high note as major banks exceeded Wall Street’s expectations:
- JPMorgan Chase: Shares rose slightly after reporting strong fixed-income trading and investment banking results.
- Goldman Sachs: Shares jumped more than 6%, following better-than-expected earnings and revenue.
- Wells Fargo: Shares climbed 5.3%, boosted by a positive outlook for net interest income in 2025.
- Citigroup: The bank saw its shares gain 6% after beating fourth-quarter estimates.
Larry Tentarelli, chief technical strategist at Blue Chip Daily Trend Report, commented:
“The bank earnings are key because the financial sector is so tied to the general economy. For these big banks to put up bullish numbers today, I think it does bode well.”