By US stocks rallied on Wednesday as traders took in cool inflation data and strong earnings among Wall Street banks.
All three benchmark indexes rose sharply after the opening bell, with the Dow Jones Industrial Average surging more than 600 points. Meanwhile, bond yields slumped. The 10-year US Treasury yield fell by 13 basis points to 4.653%, delivering some relief to markets as investors nervously watched the key bond yield approach 5% in the last week.
Headline inflation for December was in line with expectations, with consumer prices rising 2.9% on a year-over-year basis, according to the Bureau of Labor Statistics. Meanwhile, core inflation, which strips out volatile food and energy prices, rose 3.2% year over year, slightly cooler than the anticipated 3.3% increase.
Here’s where US indexes stood shortly after the 9:30 a.m. opening bell on Wednesday:
- S&P 500: 5,928.54, up 1.47%
- Dow Jones Industrial Average: 43,154.00, up 1.49% (+634.88 points)
- Nasdaq composite: 19,386.86, up 1.79%
The figures brightened investors’ outlook for Fed rate cuts this year, despite traders growing skittish over the prospect of hotter inflation and higher rates in recent weeks.
Investors are largely expecting the Fed to pause its rate-cutting cycle this month. But the probability that the Fed will cut interest rates by 25 basis points twice this year rose on Wednesday, with markets seeing a 29% chance rates will end the year 50 basis points lower from current levels, according to the CME FEdWatch tool, up from a 24% chance priced in yesterday.
“Wednesday’s softer-than-expected CPI print offers some relief, especially after last Friday’s hot employment numbers, that the Fed may be able to still cut interest rates in 2025. Even if the Fed cuts rates in 2025, it’s likely to be 6-8 months away, as we are still too far from the Fed’s inflation target for the Fed to continue their rate cut march anytime soon,” Skyler Weinand, the chief investment officer of Regan Capital, said in a statement.
“Modest inflation and a strong labor market. The CPI number is relatively good news. The Fed can be patient and the economy is healthy. This is not a time to run for the hills,” Scott Helfstein, the head of investment strategy at Global X, said.
Investors also took in strong bank earnings on Wednesday, giving a lift to financial stocks. The iShares S&P US Banks UCITS exchange-traded fund jumped over 5% Wednesday morning.
Shares of Citigroup and Goldman Sachs each surged 4% after the banks beat earnings estimates for the fourth quarter, while JPMorgan Chase rose 3% after reporting record earnings for the last quarter and the full year 2024.
Here’s what else is going on:
- Here’s how the LA wildfires could impact the economy, according to Goldman Sachs.
- Bitcoin could drop 17% from its current levels once this key support level has been breached, according to Standard Chartered.
- Russia is on track to run out of reserves by this fall, which could cripple its war efforts.
- Here’s why it’s time for the software sector to shine, according to Bank of America.
In commodities, bonds, and crypto:
- West Texas Intermediate crude oil rose 1.3% to $78.54 a barrel. Brent crude, the international benchmark, was higher by 1.1% to trade at $80.79 a barrel.
- Gold edged up 0.8% to $2,703.50 an ounce.
- The 10-year Treasury yield slid 13 basis points to 4.653%.
- Bitcoin climbed 3% to $99,340.
