As strong expectations for bank earnings paid off and a significant consumer inflation report revealed that prices rose less than anticipated in December, US markets rose on Wednesday.
The Dow Jones Industrial Average (^DJI) increased by more than 1.5%, while the benchmark S&P 500 (^GSPC) jumped by more than 1.6%. The tech-heavy Nasdaq Composite (^IXIC) surged 2.2% in the meanwhile.
After the Consumer Price Index (CPI) indicated progress toward the Fed’s 2% inflation target in December, stocks experienced a surge in value.
Prices climbed 0.2% month-on-month on a “core” basis, which strips out the more volatile costs of food and gas, an easing from November’s 0.3% gain. Over last year, core CPI rose 3.2%.
Until the latest print, annual core CPI had been stuck at a 3.3% gain for the four months. December was the first time since July that the metric reflected a deceleration in price growth.
Following the lower-than-expected figure, the 10-year Treasury yield (^TNX) fell more than 12 basis points to trade at about 4.66%. As a headwind for stocks, it had been rising to its highest level in almost a year.
The CME FedWatch Tool still gives traders a 3% possibility that the Fed will cut rates in January. Whether a cut will occur in the second half of this year is still up for debate, but it is now thought that a June relaxation is more likely than not.
