The Dow Jones Industrial Average surged over 700 points on Wednesday, and the S&P 500 had its best day since November, after a tame inflation report showed progress on rising prices. The Consumer Price Index (CPI) data for December revealed that core inflation, excluding food and energy, increased by 3.2%, slightly lower than the previous month and below economists’ expectations of 3.3%. Headline inflation rose 2.9% over the past 12 months, matching forecasts.
John Kerschner, head of U.S. securitized products at Janus Henderson Investors, said, “The market is breathing a sigh of relief as back-to-back inflation gauges, PPI yesterday and CPI this morning, came in slightly below expectations. Perhaps most importantly, today’s CPI number takes additional rate hikes off the table, which some market participants were beginning to prematurely price in.”
Following the CPI report, Treasury yields dropped sharply, with the 10-year yield down about 13 basis points at 4.65%. Growth stocks, such as Tesla and other Big Tech names, jumped around 8% and 3%, respectively, as yields fell.
The fourth-quarter earnings season started positively on Wednesday, with major banks generally exceeding Wall Street’s expectations. JPMorgan Chase shares rose nearly 2% after reporting an EPS and revenue beat, driven by strong fixed-income trading and investment banking results. Bank of America gained 6% after posting top- and bottom-line beats for the previous quarter.
Dow rallies on tame inflation report
Goldman Sachs shares jumped more than 6% after the bank said net interest income would be 1% to 3% higher in 2025, while Morgan Stanley shares gained 6% after exceeding fourth-quarter estimates. Larry Tentarelli, chief technical strategist at Blue Chip Daily Trend Report, commented, “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 put up bullish numbers today, I think it does bode well.”
In other news, shares of FTAI Aviation plummeted as much as 40% after Muddy Waters issued a report challenging the company’s accounting practices and announcing a short position. The report claimed that FTAI’s financial reporting was misleading, particularly regarding revenue from maintenance and individual off-the-rack module sales.
Quantum stocks, such as IonQ and Rigetti Computing, soared on Wednesday after Microsoft called 2025 the year to get “quantum-ready” and NVIDIA announced a “Quantum Day” at its upcoming GTC conference in March. The Federal Reserve’s Beige Book update showed a slight to moderate increase in economic activity, hiring, and prices across its 12 districts. Oil prices reached their highest levels since August, providing a boost to energy stocks.
UBS cautioned that stock market volatility is expected to persist in the coming weeks and months as investors react to incoming data and policy news amid rate uncertainty.
