On Wednesday, the S&P 500 surged as cooling inflation and strong quarterly earnings from Wall Street banks boosted investor confidence in stocks.
By 4:00 p.m. ET (21:00 GMT), the Dow Jones Industrial Average gained 703 points, or 1.7%, the S&P 500 index added 1.8%, and the Nasdaq climbed 2.5%.
December core CPI unexpectedly cools
Investor sentiment improved after data revealed that the headline consumer price index rose by 0.4% month-on-month in December, slightly faster than the previous month’s 0.3% growth. Year-on-year, CPI increased by 2.9%, up from 2.7% in November.
However, the surprise came with the core CPI figure, which excludes volatile components like fuel and food. This metric rose by 0.2% on a monthly basis and 3.2% year-on-year, slightly below expectations of 0.3% and 3.3%, respectively.
Despite this, some analysts on Wall Street still see inflation risks and maintain their expectations for only one interest rate cut this year.
“Our baseline prediction remains for a single 25 bps cut from the FOMC, with the most likely timing being March or May. The risks are tilted towards a later date,” noted Macquarie in a report.
Prior to the report, concerns had been circulating about persistent inflation, especially following last week’s strong employment data. President-elect Donald Trump’s plans to impose strict tariffs on both allies and adversaries have also heightened concerns about inflationary pressures.
Markets are bracing for a slower pace of interest rate cuts in 2025, with the Federal Reserve projecting only two rate cuts – a trend that could negatively impact risk-driven assets.
There were fears prior to this release that sticky inflation might compel the Fed to raise rates this year.
Major banks impress with quarterly results
In the corporate sector, several major banks impressed with their latest quarterly earnings reports on Wednesday, providing a lift to the weakening post-election stock market rally.
Shares of JPMorgan Chase (NYSE:JPM) rose by 2% after the investment banking giant reported record annual profits, benefiting from strong performance in dealmaking and trading in the fourth quarter. The bank also announced increased share buybacks.
Goldman Sachs (NYSE:GS) saw its stock soar by 6% as its profits more than doubled in the fourth quarter, driven by robust trading results.
Wells Fargo (NYSE:WFC) gained nearly 7% after the lender posted better-than-expected results in the fourth quarter, supported by stronger investment banking earnings.
BlackRock Inc (NYSE:BLK) climbed 5% after beating expectations on both revenue and earnings, with its assets reaching record levels in Q4.
Beacon Roofing jumps after QXO makes takeover offer; Israel Hamas ceasefire deal reached
Beacon Roofing Supply Inc (NASDAQ:BECN) surged by over 7% after the building products distributor announced that QXO had made an $11 billion deal to acquire the company.
President Joe Biden confirmed on Wednesday that Israel and Hamas had reached a ceasefire and hostage deal to end 15 months of conflict in the Gaza strip.
(Ambar Warrick contributed to this article.)