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US stocks surged on Wednesday, fueled by a slowdown in core inflation and better-than-expected earnings from major banks.The Dow Jones Industrial Average rose by 804 points, or 1.9%, while the S&P 500 gained 2% and the Nasdaq Composite climbed 2.6%.Investors breathed a sigh of relief as December’s Consumer Price Index (CPI) report showed core inflation, excluding food and energy, had decelerated to 3.2%, down from the previous month and below economists’ expectations of 3.3%.The CPI data removed concerns about further rate hikes, according to John Kerschner, head of US securitized products at Janus Henderson Investors.The 10-year Treasury yield fell sharply, and growth stocks like Tesla (TSLA) and Nvidia (NVDA) saw solid gains of around 5% and 2%, respectively, as Treasury yields dropped.
Strong earnings season kicks off with financial sector outperforming
Fourth-quarter earnings reports started on a strong note, especially from major banks.JPMorgan Chase (JPM) saw its shares climb nearly 2% after reporting better-than-expected earnings per share (EPS) and revenue, driven by solid fixed-income trading and investment banking results.Goldman Sachs’ (GS) shares surged 6% after exceeding both top and bottom-line estimates, while Wells Fargo (WFC) jumped 7% after projecting higher net interest income for 2025. Citigroup (C) also gained 7% after beating fourth-quarter expectations.“Bank earnings are critical as the financial sector is closely tied to the broader economy.Today’s bullish results from major banks suggest positive momentum for the broader market,” said Larry Tentarelli, chief technical strategist at Blue Chip Daily Trend Report.The pullback in yields following the CPI report brought relief to equity investors.
Quantum stocks and energy sector rally
Shares in quantum computing companies surged after Microsoft (MSFT) dubbed 2025 the year to get “quantum-ready.”D-Wave Quantum and Rigetti Computing soared 34% and 27%, respectively, while the Defiance Quantum & AI ETF gained 3%.This momentum was further driven by Nvidia’s announcement of a “Quantum Day” event at its upcoming GTC conference.Meanwhile, oil prices surged, reaching their highest levels since August. West Texas Intermediate crude hit $80.04 per barrel, boosting energy stocks.The Energy Select Sector SPDR Fund (XLE) gained 1.3%, marking its sixth consecutive positive session.The Federal Reserve’s “Beige Book” showed slight to moderate growth across its districts, with consumer spending picking up and vehicle sales improving.However, higher costs for materials and financing slowed construction.The labor market showed a mixed picture, with some districts seeing a slight increase in hiring and moderate wage growth.Despite the positive economic data, UBS warned that stock volatility could persist in the coming months due to rate uncertainty and potential policy shifts under President-elect Donald Trump.UBS also expects the Federal Reserve to cut rates by 50 basis points later this year.On the sector front, communication services led the S&P 500 with a 2.7% gain, while consumer discretionary, financials, and information technology sectors each rose by 2% or more.The only sector in the red was consumer staples, which saw a slight decline of 0.04%.More By This Author:GBP/USD Analysis: Here’s Why The Pound Could Crash To 1.2000 US Stocks Edge Higher As Traders Eye Inflation Data And Earnings Season Kickoff Will Banks Deliver? Earnings Report To Reveal True Picture Of U.S. Lending Sector
