US stocks surged higher on Wednesday, driven by an encouraging inflation report and robust bank earnings. The Dow jumped 703 points, or 1.65%, to close at 43,222, while the S&P 500 rose 1.83% and the Nasdaq Composite ended the day higher by 2.45%.
The latest inflation snapshot showed a slowdown in the core measure of the Consumer Price Index, rising just 0.2% from November and easing to 3.2% year over year after staying stuck at 3.3% since September 2024.
Analysts welcomed the decrease in core inflation, citing relief that it could alleviate pressure on stock and bond markets. However, some investors remain nervous about potential rises in inflation, with concerns about the Federal Reserve’s ability to cut interest rates.
Robust bank earnings have provided a positive signal for the US financial markets ahead of President-elect Donald Trump’s return to the White House. JPMorgan Chase reported a record annual profit of $58.5 billion, while Goldman Sachs and Citi also posted strong earnings.
The 10-year Treasury yield edged lower as investors digested the improvement in core inflation, providing welcome news for the stock market. Analysts expect this trend to continue, with some even predicting that further pullbacks in yields would be beneficial for stocks.
However, there is still mixed opinion on future Fed rate cuts. Some analysts believe that a weaker inflation report supports a rate cut from the Fed in March, while others maintain that the Fed’s cutting cycle is over.
In other news, oil prices surged more than 3% to surpass $82 a barrel, driven by increased tensions with Russia and concerns about inflation. Quarterly earnings from Bank of America and Morgan Stanley are expected Thursday.
Source: https://edition.cnn.com/2025/01/15/investing/us-stocks-inflation-bank-earnings/index.html