On Wednesday, the US stock market surged, with all three major indexes experiencing their best day since November 6. The three indexes registered their most significant daily percentage gains in more than two months, and stocks held on to their gains following lower-than-expected December core inflation data.
According to the Labor Department, the consumer price index (CPI) increased the most as energy costs rose, indicating underlying inflation pressures subsiding.
“Core Inflation isn’t accelerating and that’s the story,” said Jamie Cox, managing partner for Harris Financial Group. “The market may have had its hair on fire about inflation running away again, but the data do not support that conclusion.”
On Tuesday, data showed that the producer price index (PPI) increased less than expected.
Stephen Massocca, senior vice president at Wedbush Securities in San Francisco, stated, “We’ve gotten so puckered over the fact that rates might be going up and this is going to be a problem and the UK won’t be able to borrow money and oh, our deficit, and so everyone was kind of wound up.” Massocca further shared, “The CPI number and the PPI number – they’re not super cool, but they’re certainly not hot – and certainly it leads one to believe that thefollowing the CPI data, dying.”
The Dow Jones Industrial Average (.DJI) opened a new tab and rose 703.27 points, or 1.65%, to 43,221.55, the S&P 500 (.SPX) opened a new tab, gained 107.00 points, or 1.83%, at 5,949.91, and the Nasdaq Composite (.IXIC), opened a new tab and advanced 466.84 points, or 2.45%, to 19,511.23.
With all three major indexes showing their most significant daily percentage gains since November 6, as well as the domestically focused Russell 2000 (.RUT), opened a new tab index of small-cap stocks, which climbed 1.99%, investors are picking through the details to guess the direction of the market in the coming weeks.
Lingering Concerns
Following a post-US election rally, US stocks have struggled, with the S&P 500 falling in four of the previous five weeks. While a resilient economy, nagging inflation, and commentary from Federal Reserve policymakers have been fanning concerns about the central bank being less aggressive in cutting interest rates than previously hoped for, there are also lingering concerns about potential tariffs from President-elect Donald Trump’s incoming administration and how these tariffs may further impact inflation.
However, expectations for more Fed rate cuts this year increased, with Fed officials stating on Wednesday that the recent inflation data was helpful. The Fed did note uncertainty in the coming months, though, especially as they await policies from the incoming Trump administration.
While employment ticks upward and prices rise moderately amid concerns about the potential effects of Trump policies, the Fed’s Beige Book showed economic activity increased slightly to moderately in late November and December.
Other Sources of Relief
Other earnings from large banks providing support include JPMorgan (JPM.N), which opened a new tab with shares rising 1.97% on a record annual profit as markets rebounded in the fourth quarter.
Wells Fargo (WFC.N), which opened a new tab, jumped 6.69% after its fourth-quarter profit surpassed Street expectations due to a surge in dealmaking activity that boosted its investment banking business.
Goldman Sachs (GS.N) opened a new tab, up 6.02%, the most significant boost to the Dow Industrials, providing about 214 points to the upside. It followed its best quarterly profit since the third quarter of 2021.
Citigroup shot up 6.49% after turning a profit in the fourth quarter, while the S&P 500 bank index rallied 3.37%.
Other sources of relief came from a long-awaited phased deal to end the war in Gaza after 15 months of conflict.