New York
CNN
–
US stocks rose on Wednesday after an encouraging inflation report and big earnings for some of America’s biggest banks.
The Dow rose 703 points, or 1.65%, to close at 43,222. The S&P 500 rose 1.83% and the tech-heavy Nasdaq Composite ended the day higher by 2.45%.
The closing bell ended a rally on Wall Street that has helped all three major indexes recover losses and post overall gains since the start of 2025.
Stocks had started the day on a strong note, with the Dow up nearly 700 points shortly after the release of the latest inflation outlook. The data showed a slowdown in the core measure of the Consumer Price Index for the first time in a month, rising just 0.2% from November and easing to 3.2% year-on-year after being stuck at 3.3% since September 2024.
That’s an improvement despite total consumer prices rising 2.9% year over year in December, up from 2.7% a month earlier, according to data from the Bureau of Labor Statistics released Wednesday.
“We believe the market will be encouraged by lower core inflation, which should ease some of the pressure on equity and bond markets, both of which have had a weak start to the year due to inflation fears and concerns that the Federal Reserve not only stops cutting interest rates, but may even reverse course and start raising them,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management, in a note.
The VIX, Wall Street’s gauge of fear, fell more than 13% on Wednesday as investors felt a moment of relief.
“While volatility may make it a bumpy ride before the S&P 500 hits our year-end target of 6,600, we expect the bull market in stocks to continue,” said Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management . note on Wednesday.
Strong fourth-quarter bank earnings are a positive signal for the well-being of the biggest players in US financial markets ahead of President-elect Donald Trump’s return to the White House.
JPMorgan Chase ( JPM ) posted a record annual profit of $58.5 billion, pulling in $14 billion in net income in the fourth quarter, as a lower interest rate environment and post-election market volatility proved profitable for the bank.
“Businesses are more optimistic about the economy and are encouraged by expectations for a more pro-growth agenda and improved cooperation between government and business,” JPMorgan Chase CEO Jamie Dimon said in a statement.
Goldman Sachs ( GS ) also posted strong earnings on Wednesday, posting a $4.11 billion profit in the fourth quarter, more than double its profit in the fourth quarter of 2023.
According to press release. Shares of Citigroup rose about 6.49%.
Shares of Wells Fargo ( WFC ) rose 6.69% on Wednesday after beating expectations and posting a profit of $5.1 billion in the fourth quarter of 2024, up from $3.4 billion in the same period a year ago.
“Our number one stock idea for 2025 is long investment banks due to a potential boom in both AI-related M&A and IPOs,” said Jay Hatfield, CEO and CIO at Infrastructure Capital Advisors. in an email.
BlackRock (BLK), the world’s largest asset management firm, reported a fourth-quarter profit of $1.67 billion, up 21% from the same period a year ago. BlackRock’s assets under management in 2024 rose to a record $11.55 trillion, up 15% from a year earlier. Shares of BlackRock rose 5.19% on Wednesday.
The 10-year Treasury yield fell as the bond market digested the improvement in core inflation, highlighting how nervous some investors were about the potential for a rise in inflation.
The fall in yields is welcome news for the stock market, where investors have recently been concerned that rising yields would pull money out of stocks and into bonds.
“Any further pullback in yields would be a constructive headwind for stocks and the S&P 500,” Larry Tentarelli, chief technical strategist at Blue Chip Daily Trend Report, said in a note.
Joe Brusuelas, chief economist at RSM US, said he suspects bond and stock market reactions may fade. “These are not good numbers,” Brusuelas said of the inflation report. “The bond market is very weak at the moment. And they are prone to overreaction.”
After a new jobs report on Friday, Wall Street adjusted its expectations for fewer Fed rate cuts in 2025 than previously expected. However, there is nothing but consensus at the big banks.
Michael Gapen, chief US economist at Morgan Stanley, said in a note on Wednesday that he thinks Wednesday’s inflation report is consistent with a rate cut by the Fed in March.
“Weaker inflation should give the Fed more confidence that the recent acceleration was just a blip,” Gapen said.
Meanwhile, Bank of America Global Research maintains its view that the Fed is done cutting rates.
“Today’s CPI squeeze reduces the risk of imminent hikes … But it doesn’t move the needle on our view that the Fed’s tapering cycle is over,” Aditya Bhave, senior U.S. economist at Bank of America Global Research, said in a note. Wednesday note.
UBS’s Marcelli said in a note on Wednesday that rate cuts by the Fed “are still on the table” as she expects inflation to continue to moderate.
Brent crude, the global oil benchmark, rose more than 3% to surpass $82 a barrel and hit its highest price since August 2024. WTI crude futures, the benchmark U.S. crude rose about 3.65% and briefly crossed $80 a barrel for the first time since August. Oil prices have risen sharply since the end of 2024, an increase that could significantly raise gasoline prices and raise inflation concerns.
Late last week, President Joe Biden imposed some of the toughest sanctions yet on Russia’s oil industry, adding to mounting pressure on energy prices.
Quarterly earnings from Bank of America ( BAC ), Morgan Stanley ( MS ) and more are expected on Thursday.
