A specialist trader works at his post on the floor at the New York Stock Exchange (NYSE) in New York City.
Brendan McDermid | Reuters
Stocks surged on Wednesday after the latest consumer price index report showed core inflation unexpectedly slowed in December, and major U.S. banks kicked off quarterly earnings reporting season with blowout results.
The Dow Jones Industrial Average traded 656 points higher, or 1.5%. The S&P 500 climbed 1.7%, and the Nasdaq Composite rallied 2.2%.
December’s consumer price index showed that core inflation, which excludes food and energy, rose 3.2%, the Bureau of Labor Statistics reported Wednesday. This was a notch down from the previous month and lower than the 3.3% estimated by economists surveyed by Dow Jones. Headline inflation increased 2.9% on a 12-month basis, in line with forecasts.
“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,” said John Kerschner, head of U.S. securitized products and portfolio manager at Janus Henderson Investors. “Perhaps most importantly, today’s CPI number takes additional rate hikes off the table, which some market participants were beginning to prematurely price in.”
The 10-year Treasury yield sharply dropped on the back of the CPI report and was last down around 13 basis points at 4.663%. Growth stocks such as Tesla and Nvidia popped around 5% and 2%, respectively, as Treasury yields dove.
Fourth-quarter earnings reporting got off to a positive start Wednesday, with big banks managing to broadly top the Street’s expectations. JPMorgan Chase shares rose 1.8% after the bank reported an EPS and revenue beat, which was driven by strong fixed income trading and investment banking results.
Shares of Goldman Sachs popped more than 5% after the bank posted a top- and bottom-line beat in the previous quarter, and Wells Fargo shares jumped nearly 6% after the bank said net interest income would be 1% to 3% higher in 2025. Citigroup also gained 6.7% after beating fourth-quarter estimates.
“We got a good start today to earnings season. The bank earnings are key because the financial sector is so tied to the general economy. So for these big banks to put up bullish numbers today, I think it does bode well,” said Larry Tentarelli, chief technical strategist at Blue Chip Daily Trend Report.
