On Wednesday, the Dow Jones Industrial Average surged by more than 700 points, while the S&P 500 experienced its strongest performance since November, following a mild inflation report indicating improvement in price increases. The Consumer Price Index (CPI) data for December disclosed that core inflation, which excludes food and energy, rose by 3.2%—a slight decrease from the previous month’s figures and below the economists’ forecast of 3.3%. Over the past year, headline inflation increased by 2.9%, aligning with expectations.
John Kerschner, the head of U.S. securitized products at Janus Henderson Investors, stated, “The market is exhaling with relief as two recent inflation reports, the PPI from yesterday and today’s CPI, came in slightly under predictions. Perhaps most crucially, today’s CPI figure removes further rate hikes from consideration, which was something some market players were starting to factor in too soon.”
In the aftermath of the CPI announcement, Treasury yields saw a significant decline, with the 10-year yield dropping roughly 13 basis points to 4.65%. Growth stocks, including Tesla and other major tech companies, saw rises of approximately 8% and 3%, respectively, as yields decreased.
The start of the fourth-quarter earnings season arrived positively on Wednesday, with leading banks largely surpassing Wall Street’s projections. Shares of JPMorgan Chase climbed nearly 2% following a report that showcased earnings per share (EPS) and revenue exceeding estimates, bolstered by robust fixed-income trading and investment banking performances. Bank of America surged by 6% after delivering both top and bottom-line beats for the prior quarter.
Dow rises on mild inflation figures
Goldman Sachs stock soared over 6% after announcing a projected 1% to 3% increase in net interest income for 2025, while Morgan Stanley’s shares likewise increased by 6% after beating fourth-quarter expectations. Larry Tentarelli, chief technical strategist at Blue Chip Daily Trend Report, remarked, “We had an encouraging start to earnings season today.
The performance of bank earnings is essential since the financial sector is closely linked to the overall economy. So, seeing these large banks report optimistic figures today is encouraging.”
In other developments, shares of FTAI Aviation dropped by as much as 40% after Muddy Waters released a report questioning the company’s accounting practices and announcing a short position. The report criticized FTAI’s financial reporting as misleading, particularly concerning revenue from maintenance and individual off-the-shelf module sales.
Quantum technology stocks, including IonQ and Rigetti Computing, experienced notable gains on Wednesday after Microsoft designated 2025 as the year to become “quantum-ready” and NVIDIA announced a “Quantum Day” at its upcoming GTC conference scheduled for March. The Federal Reserve’s Beige Book update indicated a slight to moderate uptick in economic activity, hiring, and pricing across its 12 districts. Oil prices reached their highest point since August, contributing to a rise in energy stocks.
UBS warned that stock market volatility is anticipated to continue in the weeks and months ahead as investors react to new data and policy changes amidst rate uncertainty.
