In This Article:
A softer-than-expected December inflation report and strong earnings from the nation's major U.S. banks Wednesday boosted investors' confidence as stocks surged. The S&P 500 and Nasdaq Composite likewise added 1.7% and 2.3%, respectively, while the Dow Jones Industrial Average rose 725 points, or 1.7 percent.
Core inflation, which includes food and energy but excludes volatile items, rose 3.2% year over year, less than the economists' 3.3% estimate. Headline inflation rose 2.9%, which is in line with forecasts. The data builds on similarly positive producer price index (PPI) data that had eased concerns about further Federal Reserve rate hikes. Market relief is evident in the 10-year Treasury yield, which fell 10 basis points to 4.686%.
Declining yields benefited growth stocks that leapt 5% on Tesla (TSLA, Financial) and 2% on Nvidia (NVDA, Financial). Better-than-expected quarterly results provided a boost to Financials, which also got a boost. JPMorgan reports strong fixed-income trading and investment banking performance in earnings beat. Wall Street was uplifted by upbeat earnings and guidance, capping gains at 6% for Goldman Sachs (GS, Financial), 6% for Citigroup (C, Financial) and 5.3% for Wells Fargo (WFC, Financial).
"The fact that major banks are posting positive earnings is good news for financials and will be important for the rest of the economy," said Larry Tentarelli, chief technical strategist at Blue Chip Daily Trend Report.
Wall Street goes into earnings season with optimism tempered by inflation cooling, stronger-than-expected financial results and easing macroeconomic pressure as sentiment improves across sectors.
This article first appeared on GuruFocus.