Stocks Soar as Inflation Slows and Big Banks Report Strong Earnings

NEW YORK (AP) — U.S. stocks surged Wednesday as inflation data showed signs of easing and major banks reported stronger-than-expected earnings, sparking optimism among investors. The Dow Jones Industrial Average climbed 647 points, or 1.5%, while the S&P 500 rose 1.4% and the Nasdaq Composite gained 1.7%.

The rally followed the release of December’s Consumer Price Index (CPI) report, which showed core inflation, excluding food and energy, rose 3.2% year-over-year, slightly below economists’ expectations of 3.3%. Headline inflation increased 2.9%, in line with forecasts. The data fueled hopes that the Federal Reserve might ease its monetary policy stance later this year.

“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 at Janus Henderson Investors. “Today’s CPI number takes additional rate hikes off the table, which some market participants were beginning to prematurely price in.”

Bank earnings also buoyed investor sentiment. JPMorgan Chase, Goldman Sachs, and Wells Fargo all reported robust fourth-quarter results, with JPMorgan shares rising slightly after beating earnings per share (EPS) and revenue estimates. Goldman Sachs shares jumped more than 6%, while Wells Fargo gained 5.3% after forecasting higher net interest income for 2025.

“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.

The 10-year Treasury yield dropped sharply, falling 14 basis points to 4.651%, as growth stocks like Tesla and Nvidia surged 5% and 2%, respectively. Bank ETFs also saw gains, with the SPDR S&P Bank ETF (KBE) and SPDR S&P Regional Banking ETF (KRE) both rising around 3%.

Investors are now closely watching the Federal Reserve’s next moves, with many anticipating potential rate cuts in 2025 if inflation continues to moderate. The strong earnings reports from major banks, coupled with easing inflation, have provided a much-needed boost to markets after a rocky start to the year.