Investing.com — US stocks rose sharply Wednesday after the release of cooler than expected underlying consumer inflation, raising the potential for easier monetary policies this year.
At 08:40 ET (13:40 GMT), the Dow Jones Industrial Average gained 705 points, or 1.7%, the S&P 500 index rose 98 points, or 1.7%, and the NASDAQ Composite climbed 380 points, or 1.7%.
December CPI cooler than expected
Sentiment has been boosted Wednesday after data showed the headline consumer price index increased by 0.4% month-on-month in December, slightly faster than a pace of 0.3% in the prior month. Compared to a year earlier, CPI gained 2.9%, up from 2.7% in November.
However, the surprise came with the so-called “core” figure, which strips out volatile components like fuel and food. This rose 0.2% on a monthly basis and 3.2% year-on-year, below expectations for 0.3% and 3.3%, respectively.
Heading into the report, concerns had been swirled around nagging inflation, particularly after last week’s blockbuster employment data. President-elect Donald Trump’s plans to impose strict tariffs on allies and adversaries alike have also fueled the worries around price pressures.
Markets are positioning for a much slower pace of interest rate cuts in 2025, with the Federal Reserve forecasting just two rate cuts – a trend that could bode poorly for risk-driven assets.
There had been fears before this release that the Fed may actually be forced by sticky inflation to raise rates this year.
Major banks impress with quarterly results
In the corporate sector, a number of major banks impressed with their latest quarterly returns on Wednesday, offering a boost to the waning post-election stock market rally.
JPMorgan Chase (NYSE:JPM) stock rose 0.5% after the investment banking giant posted record annual profit as its dealmakers and traders reaped a windfall from rebounding markets in the fourth quarter.
Goldman Sachs (NYSE:GS) stock soared 5.5% after the investment bank’s profit more than doubled in the fourth quarter, driven by strong reading results.
Wells Fargo (NYSE:WFC) stock gained over 5% after the lender reported better-than-expected results in the fourth quarter, buoyed by stronger investment banking earnings.
Crude boosted by US inventory draw
Oil prices edged higher Wednesday, helped by the cool US inflation data as well as a drop in US crude stockpiles.
By 09:50 ET, the US crude futures (WTI) rose by 1.5% to $77.50 a barrel, while the Brent contract added 1.1% to $80.83 per barrel.
Prices slipped on Tuesday after the US Energy Information Administration predicted oil would come under pressure over the next two years as supply would outpace demand.
That said, the market has found some support from a report from the American Petroleum Institute late Tuesday that showed a decline in crude stockpiles in the US, the world’s biggest oil consumer.
Traders also continue to focus on the Russian oil sanctions, amid uncertainty around how much Russian supply will be lost in the global market and whether alternative measures can offset the shortfall.
(Ambar Warrick contributed to this article.)