Dow jumps 700 points, Nasdaq soars 2.5% after cool CPI reading

U.S. stocks rose sharply on Wednesday as high hopes for bank earnings and a key update on consumer inflation paid off showed key prices rose less than expected in December.

The benchmark S&P 500 (^GSPC) rose more than 1.8%, while the Dow Jones Industrial Average (^DJI) rose by more than 1.6%, or more than 700 points. Meanwhile, the tech-heavy Nasdaq Composite (^IXIC) increased by 2.5%.

Stocks rose after the Consumer Price Index (CPI). showed progress to the Fed's 2% inflation target in December.

Prices rose 0.2% month-on-month on a “core” basis, which strips out more volatile food and gas costs, easing from a 0.3% gain in November. Last year, the core CPI rose by 3.2%.

Up until last printing, annual core CPI had been stuck at a 3.3% increase over the past four months. December was the first time since July that the metric reflected a slowdown in price growth.

DJI – Delayed offer USD

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10-year Treasury yield (^TNX) fell more than 13 basis points to trade around 4.65% after a cooler than expected reading. That was it rose to their highest level in more than a year, serving as a headwind for stocks. The interest rate-sensitive Russell 2000 Small-Cap Index (^RUTH) surged in response, rising nearly 2%.

Traders still see just a 3% chance the Fed will cut rates in January, using the CME FedWatch Tool. They remain divided on whether there will be a cut in the second half of this year, with the chances of a June release now considered more likely than not.

Spirits were also boosted by earnings reports from Wall Street banks, which saw profits surge on a rebound in business and strength in investment banking. JPMorgan Chase (JPM) delivered on optimistic expectations of analysts sa second year in a row with record profitswhile Goldman Sachs (GS) profit exceeds estimates. BlackRock (BLK), Wells Fargo (WFC) a BNY (BK) also reserved buffer districts.

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Financials lead S&P 500 sectors after strong banking earnings

Financials led sector action on Wednesday as a rise in investment banking and trading revenue helped deliver well-received results from several major banks including JPMorgan (JPM) Goldman Sachs (GS), Citigroup (C) and Wells Fargo (WFC).

Read more about their results here.
'Magnificent 7' stocks roar after CPI rise

Amid Wednesday's massive rally in stocks, large-cap tech is still the clear leader.

All seven so-called “The Magnificent Seven” tech stocks — Apple (AAPL), Alphabet (GOOGLE, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), Tesla (TSLA) and Nvidia (NVDA) — increased by more than 1.5% or more.

The Roundhill Magnificent Seven ETF (MAGAZINES) rose more than 3.5%, significantly outpacing gains in the three major averages.
Portfolio manager says it's “too early to call” a peak in bond yields

A big drop in the 10-year government bond yield (^TNX) drop to 4.65% sparked renewed interest in risky assets on Wednesday.

But like we emphasizedThe recent increase over the past 10 years has been due to a number of reasons, not just expectations of higher inflation. AND one positive news on the consumer price index doesn't fully explain the recent higher rate headwinds for equities, Wellington Management fixed income portfolio manager Brij Khurana told Yahoo Finance.

Khurana said it was “still too early” to mark a peak in bond yields, adding that if the new Trump administration brings in more fiscal spending than expected, yields could begin another move higher.

Still, Khurana described Wednesday's market action as “a welcome relief for the bond market.”

“There are two-way risks to bond yields,” Khurana said. “It's not just one way.
Inflation data shows Jerome Powell is right

Wednesday better than expected inflation reading showed one particularly promising sign for the Federal Reserve.

The shelter index saw prices rise 4.6% from a year earlier, the lowest level since January 2022. While the index still remains elevated, one of the stickers in the inflation story over the past few years continues to show the progress of the Federal Reserve chair. Jerome Powell discussed in recent press conferences.

“With housing services inflation, which is what we were really worried about, it's actually coming down pretty steadily now, at a slower pace than we thought … but still coming down steadily,” Powell said on Dec. 18. .

Further progress in inflation hotspots such as housing is why some economists believe a rate cut will remain on the table in 2025.

“The slowdown in recent months is exactly that [Powell] spoke and should give the FOMC more confidence that they can continue to cut rates this year, even if they pause in the near term,” Jefferies U.S. economist Thomas Simons wrote in a note to clients on Wednesday.

Read more about cover inflation here.
Bitcoin nears $100,000, followed by broader market higher

Bitcoin (BTC-USD) inflation surged to just under $99,000 after a mild reading on Wednesday morning.

Following movements in the broader market, the world's largest cryptocurrency has been an emerging trend in recent weeks.

Read more about what's been driving Bitcoin prices lately by Ethan Wolff-Mann of Yahoo Finance here.
Jamie Dimon's “core case” for stepping down as JPMorgan CEO is years away

Realignment at JPMorgan (JPM) on Tuesday pink questions about when CEO Jamie Dimon will step down.

A bank executive said Wednesday that it likely won't be anytime soon.

David Hollerith of Yahoo Finance reports:

Jamie Dimon on Wednesday agreed with an analyst's assessment that his “core case” for leaving JPMorgan Chase (JPM) CEO is in a few years.

The new comments on the succession came one day after the country's biggest bank announced a management reshuffle which raised new questions about race for success Dimon, 68, the longest-serving CEO of a major bank.

Read more here.
Oil prices jumped 2% as inventories fell for an eighth straight week

Oil prices jumped on Wednesday as US crude inventories fell for an eighth straight week.

Intermediate West Texas (CL=F) jumped more than 2.5% to trade around $79.50 a barrel, while Brent (BZ=F), the international benchmark, rose 2% to hover above $81.

Oil rose as U.S. inventories fell by 1.96 million barrels last week to the lowest level since April, according to the latest Energy Information Administration data released on Wednesday. At the same time, gasoline stocks reached their highest level in the last year.

Raw has was on the rise recently after the US announced sweeping sanctions against oil producer Russia in an effort to cut off Moscow's revenue amid the ongoing war in Ukraine.
There is still a way to cut interest rates in 2025

last friday hotter than expected December jobs report spooked the market and introduced debate that the Federal Reserve would not cut interest rates at all or possibly an increase in interest rates at some point.

Economists have largely argued that the jobs print has intensified the focus on whether inflation will begin to show signs of softening, which could prompt the Fed to cut interest rates in 2025. Early evidence of the trend This follows from Wednesday's Consumer Price Index (CPI).

On an underlying basis, which strips out more volatile food and gas costs, prices rose 3.2% from a year earlier. This marked the first decline in core CPI since July.

While economists don't believe the data will force the Federal Reserve to cut interest rates at its January meeting, some see a path to a rate cut later in 2025.

Citi economist Veronica Clark wrote in a note to clients on Wednesday that markets had “overestimated the stickiness of inflation.”

“Details from the December data should also be encouraging going forward [Fed] mitigation, with many components largely as expected and in line with pre-pandemic norms,” Clark wrote.

“Weaker inflation should give the Fed more confidence that the recent acceleration was just a blip,” Morgan Stanley chief economist Michael Gapen wrote. “This print is consistent with our call for rate cuts in March.”
JPMorgan's profits soared

JPMorgan (JPM) shares traded just above the flat line on Wednesday despite a big increase in profit at America's largest bank.

David Hollerith of Yahoo Finance reports:

Last year JPMorgan Chase (JPM) spat out more profits than ever before and made $14 billion in the last quarter of 2024.

Its full-year profits rose to $58 billion, an all-time record for JPMorgan and the most in US banking history. Its fourth-quarter profits rose 50% compared to the year-ago period.

These results were supported by a sharp increase in JPMorgan's operations on Wall Street as dealmaking is making a comeback across the industry after a two-year drought. JPMorgan's investment banking revenue rose 49% from a year earlier.

Read more here.
Sea green under the open sky

At the start of Wednesday's trading session on Wall Street, there was a broad rally in stocks.

All 11 sectors were in the green with interest rate sensitive sectors such as real estate (XLRE) and public services (XLU) leads the attack. Five sectors outperformed the S&P 500 (^GSPC) 1.3% gain.
Bond yields took a breather

Recent headwinds for stocks died down Wednesday morning.

10-year Treasury yield (^TNX), which was at its highest level in more than a year, fell more than 12 basis points to 4.66% after cooler-than-expected consumer inflation readings.

Meanwhile, stocks rallied, with futures tied to major averages all up 1.5% or more.
The latest CPI data shows that prices rose less than expected in December

Fresh consumer inflation data out Wednesday showed prices rose less than expected in December.

Consumer Price Index data from the Bureau of Labor Statistics showed that on a “core” basis — which strips out fluctuating food and gas costs — prices rose 0.2% month-over-month. That was less than economists had expected by 0.3%.

Year-on-year, core prices rose 3.2%, which was less than the 3.3% expected by economists. It was the first drop in the metric since July.

Overall CPI rose 2.9% in December from a year earlier, up from 2.7% in November but in line with economists' expectations. The index rose 0.4% from the previous month, beating the 0.2% gain seen in November and also in line with economists' estimates.
Good morning. Here's what's happening today.
Interesting morning reading on global risks

Yours truly is getting ready for another week of impressive news on the web World Economic Forum in Davos, Switzerland – which starts next Monday. I'll tell you more about what we'll be doing there in this Sunday morning newsletter.

I will quickly note that a source familiar with the matter told me that President Trump will speak via video on Thursday, just days after his inauguration (and possibly a flurry of executive orders).

But before the fun, I was thinking about WEF Annual Global Risk Report which dropped this morning is an interesting read. The highest risk is “state armed conflict”. Other major risks include disinformation and misinformation (good to see Zuck no longer fact-checks the Meta…), extreme weather events, social polarization, cyber-espionage, and warfare.

We think many of these risks are not priced into Mag 7 shares!

“Rising geopolitical tensions and erosion of trust are driving the global risk scene,” WEF Executive Director Mirek Dušek said in a statement. “In this complex and dynamic context, leaders have a choice: find ways to foster collaboration and resilience, or face complex vulnerabilities.”