The stock market experienced a significant rally on Wednesday, buoyed by the latest consumer price index report indicating a slowdown in core inflation for December. Adding to the positive sentiment, major U.S. banks initiated the quarterly earnings reporting season with surprisingly strong results, further propelling market gains.
The Dow Jones Industrial Average surged by 703.27 points, a 1.65% increase, closing at 43,221.55. Similarly, the S&P 500 climbed 1.83% to reach 5,949.91, and the Nasdaq Composite saw an even more substantial rally of 2.45%, closing at 19,511.23. This marked the most robust daily performance for all three major averages since November 6.
Driving this market enthusiasm was the December consumer price index. The report from the Bureau of Labor Statistics revealed that core inflation, excluding volatile food and energy prices, rose by 3.2%. This figure was not only a decrease from the previous month but also fell below the 3.3% projection from economists surveyed by Dow Jones. Headline inflation, which includes food and energy, increased by 2.9% over the 12-month period, aligning with anticipated forecasts.
According to John Kerschner, head of U.S. securitized products and portfolio manager at Janus Henderson Investors, “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.” He further noted the significance of the CPI data in tempering expectations of further interest rate hikes, stating, “Perhaps most importantly, today’s CPI number takes additional rate hikes off the table, which some market participants were beginning to prematurely price in.”
In response to the encouraging CPI report, the 10-year Treasury yield experienced a sharp decline, dropping roughly 13 basis points to approximately 4.65%. This decrease in Treasury yields provided a boost to growth stocks. Notably, Tesla shares jumped by around 8%, while Nvidia saw an increase of about 3% as investors reacted positively to the lower yield environment.
Adding to the market’s positive momentum, the fourth-quarter earnings season commenced on a high note, with major banks exceeding Wall Street expectations. JPMorgan Chase reported strong earnings per share and revenue figures, driven by robust performance in fixed-income trading and investment banking. Following this announcement, JPMorgan Chase shares rose by nearly 2%.
Goldman Sachs also reported impressive top- and bottom-line results for the previous quarter, leading to a 6% surge in its stock price. Wells Fargo shares jumped by over 6% after the bank projected a 1% to 3% increase in net interest income for 2025. Citigroup also contributed to the positive bank earnings trend, beating fourth-quarter estimates and seeing its shares gain 6%.
Larry Tentarelli, chief technical strategist at Blue Chip Daily Trend Report, commented on the significance of bank earnings, stating, “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.” This positive start to earnings season, combined with the encouraging inflation data, painted a bullish picture for the stock market today.
