Wall Street Surges as Core Inflation Eases and Bank Earnings Impress

Markets Climb to One-Week Highs

Wall Street’s main indexes soared on Wednesday, fueled by lower-than-expected core inflation data for December and robust quarterly earnings from major U.S. banks. At 09:41 a.m. ET, the Dow Jones Industrial Average rose 613.51 points (1.44%) to 43,131.79, the S&P 500 gained 85.16 points (1.46%) to 5,928.07, and the Nasdaq Composite added 335.07 points (1.76%) to reach 19,379.64.

The small-cap Russell 2000 index led gains, jumping 2.3%.

Encouraging Inflation Data

The Labor Department reported that the consumer price index (CPI) for December rose in line with expectations, while core CPI advanced 3.2% year-on-year, slightly below the estimated 3.3%. The data bolstered market sentiment, as traders increasingly price in nearly even odds of two Federal Reserve rate cuts by the end of 2025, with the first expected in June.

The benchmark Treasury yield dipped from its 14-month high, settling at 4.64%, which provided additional support for real estate stocks, leading to a 2.2% sector gain.

Strong Bank Earnings Boost Sentiment

Quarterly earnings from major banks impressed investors:

• JPMorgan Chase: Shares rose 0.6% after the bank posted record annual profit for the fourth quarter.
• Wells Fargo: Gained 4.2% after exceeding profit expectations, driven by a rebound in investment banking activity.
• Goldman Sachs: Climbed 4.9%, reporting its best quarterly profit since Q3 2021.
• Citigroup: Shares increased 3.9% after swinging to a profit in the fourth quarter.

The S&P 500 Banks Index advanced 1.9%, putting it on track for a 5% gain in January, outperforming Wall Street’s broader indexes.

Key Market Drivers

Adam Sarhan, CEO of 50 Park Investments, attributed the market’s rally to “a confluence of two bullish factors: controlled inflation, which opens the door for easier Fed policy, and strong bank earnings reflecting robust economic activity.”

The banking index’s strong performance in 2024 was fueled by optimism surrounding President-elect Donald Trump’s proposed tax cuts and deregulatory policies.

Broader Market Gains

BlackRock shares jumped 3.9% as the asset manager reported a record $11.6 trillion in assets under management for Q4. Overall, advancing issues outnumbered decliners by a 13.19-to-1 ratio on the NYSE and by a 4.74-to-1 ratio on the Nasdaq.

The S&P 500 posted 13 new 52-week highs, while the Nasdaq Composite recorded 37 new highs and 25 new lows.

Looking Ahead

Market participants will closely watch remarks from New York Fed President John Williams and Chicago Fed President Austan Goolsbee later in the day. The Federal Reserve’s Beige Book on economic activity is also scheduled for release at 2:00 p.m. ET.