Investing.com -- The S&P 500 closed sharply higher Wednesday as cooling inflation and strong quarterly earnings from Wall Street banks stoked bullish sentiment on stocks.
At 4:00 p.m. ET (21:00 GMT), the Dow Jones Industrial Average gained 703 points, or 1.7%, the S&P 500 index added 1.8%, and the NASDAQ Composite climbed 2.5%.
December core CPI unexpectedly cools
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.
Still, some on Wall Street continue to see risks for inflation and reiterate expectations for just one cut this year.
"Our baseline remains for just one further 25 bps cut from the FOMC, with the most likely timing being March or May. Risks remain skewed to a later date," Macquarie said in a note.
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 2% after the investment banking giant posted record annual profit as its dealmakers and traders reaped a windfall from rebounding markets in the fourth quarter. The Wall Street bank also touted increased share buybacks.
Goldman Sachs (NYSE:GS) stock soared 6% after the investment bank’s profit more than doubled in the fourth quarter, driven by strong reading results.
Wells Fargo (NYSE:WFC) stock gained nearly 7% after the lender reported better-than-expected results in the fourth quarter, buoyed by stronger investment banking earnings.
BlackRock Inc (NYSE:BLK), meanwhile, climbed 5% after reporting a beat on both the top and bottom lines as its assets hit a record high in Q4.
Beacon Roofing jumps after QXO makes takeover offer; Israel Hamas ceasefire deal reached
Beacon Roofing Supply Inc (NASDAQ:BECN) rose more than 7% after the building products distributor said QXO had made an deal worth $11 billion to buy the company.
President Joe Biden confirmed Wednesday that Israel and Hamas reached ceasefire and hostage deal to end 15 months of war on the Gaza strip.
(Ambar Warrick contributed to this article.)