Stocks surged on Wednesday, with major indices posting their best gains since November 6, following the release of the latest consumer price index (CPI) report showing unexpected signs of slowing inflation and strong earnings from major U.S. banks.
The Dow Jones Industrial Average rose 703.27 points, or 1.65%, to finish at 43,221.55. The S&P 500 climbed 1.83% to 5,949.91, while the Nasdaq Composite surged 2.45% to 19,511.23.
The CPI data revealed that core inflation, which excludes food and energy, increased by 3.2% in December, slightly below the previous month’s rise and below economists’ expectations of 3.3%. Headline inflation increased by 2.9% year-over-year, in line with forecasts.
“The market is breathing a sigh of relief as back-to-back inflation reports—PPI yesterday and CPI today—came in slightly below expectations,” noted John Kerschner, head of U.S. securitized products and portfolio manager at Janus Henderson Investors. He added, “Most importantly, today’s CPI number takes additional rate hikes off the table, which some market participants had prematurely priced in.”
In reaction to the CPI report, the 10-year Treasury yield fell sharply, dropping by around 13 basis points to approximately 4.65%. This drop in yields helped boost growth stocks, with Tesla and Nvidia rising 8% and 3%, respectively.
The fourth-quarter earnings season also kicked off with positive results from major banks. JPMorgan Chase saw nearly a 2% increase in its stock after reporting better-than-expected earnings and revenue, driven by strong performance in fixed-income trading and investment banking. Goldman Sachs shares jumped 6% after its earnings beat expectations, while Wells Fargo surged more than 6% following its positive outlook for 2025 net interest income. Citigroup’s shares also gained 6% after exceeding fourth-quarter estimates.
“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 post bullish numbers today, I think it bodes well,” said Larry Tentarelli, chief technical strategist at Blue Chip Daily Trend Report.
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