Core inflation slows in December, boosting US stocks, with major banks beating earnings forecasts
On Wednesday, US stocks surged as the latest consumer price index (CPI) report revealed a slowdown in core inflation for December.
Major US banks also kicked off the quarterly earnings season with strong results, according to CNBC.
The Dow Jones Industrial Average climbed 703.27 points, or 1.65 percent, closing at 43,221.55.
The S&P 500 rose 1.83 percent to 5,949.91, and the Nasdaq Composite advanced 2.45 percent to 19,511.23, marking the best day for all three indices since November 6.
The Bureau of Labor Statistics reported that US core inflation, excluding food and energy, increased by 3.2 percent in December.
This was slightly below November’s figure and the 3.3 percent predicted by economists surveyed by Dow Jones. Headline inflation rose 2.9 percent on a year-over-year basis, meeting expectations.
John Kerschner, head of US securitized products and portfolio manager at Janus Henderson Investors, noted that the market seemed relieved after consecutive US inflation indicators, including the PPI and CPI, came in slightly below expectations.
He added, “Today’s CPI number takes additional rate hikes off the table, which some market participants were beginning to prematurely price in.”
The 10-year Treasury yield dropped significantly in response to the US CPI report, falling about 13 basis points to 4.65 percent. Growth stocks saw notable gains as Treasury yields fell, with Tesla rising 8 percent and Nvidia up by 3 percent.
Meanwhile, fourth-quarter earnings season began on a positive note as major US banks exceeded Wall Street expectations.
JPMorgan Chase shares increased nearly 2 percent after the company reported an earnings-per-share (EPS) and revenue beat, driven by strong fixed-income trading and investment banking performance.
Goldman Sachs also delivered a strong quarter, with its shares rising 6 percent on a top- and bottom-line beat.
Wells Fargo shares climbed more than 6 percent following the announcement that net interest income would grow 1 to 3 percent in 2025.
Citigroup shares jumped 6 percent after surpassing fourth-quarter earnings estimates.
Larry Tentarelli, chief technical strategist at Blue Chip Daily Trend Report, remarked that earnings season had started on a positive note. He emphasized the importance of bank earnings, highlighting that the financial sector is closely linked to the broader US economy.
Tentarelli stated, “For these big banks to put up bullish numbers today, I think it does bode well.”
