4:10pm: Market rallies on cooling inflation
Stocks surged on Wednesday, with all major indexes posting significant gains as investors cheered softer-than-expected inflation data, boosting hopes for potential interest rate cuts in 2025.
The Nasdaq led the rally, soaring 2.5% or 467 points to close at 19,511. The S&P 500 followed with a robust gain of 1.8% or 107 points, ending the session at 5,950. The Dow Jones Industrial Average also posted a strong performance, climbing 1.7% or 703 points to finish at 43,222.
The market rally accelerated into the closing bell, driven by the release of December's Consumer Price Index (CPI) report, which showed core inflation unexpectedly slowing. This data eased concerns about persistent inflation and rekindled optimism for potential Federal Reserve rate cuts in the coming year.
Treasury yields retreated in response to the CPI report, with the 10-year Treasury yield dropping to 4.76%, down from recent highs. This decline in yields further supported the stock market rally, as lower borrowing costs typically benefit businesses and consumers alike.
As the trading day concluded, market participants appeared to be recalibrating their expectations for the Federal Reserve's monetary policy, with the softer inflation data potentially paving the way for a more accommodative stance in the months ahead.
2:45pm: Tech and financial stocks shine
US stocks are surging in midafternoon trading, with all major indices posting significant gains. The Dow Jones is up 1.8%, the S&P 500 has climbed 1.9%, and the Nasdaq is leading the charge with a 2.5% increase.
The rally comes on the heels of softer-than-expected CPI data released earlier today, which has bolstered hopes for potential interest rate cuts by the Federal Reserve. This positive sentiment has been further reinforced by strong quarterly earnings reports from major banks.
Tech stocks are performing particularly well, with mega-cap names like Apple, Nvidia, Microsoft, Amazon, Alphabet, Meta Platforms, and Tesla all trading in positive territory. The financial sector is also showing strength, with shares of Wells Fargo, JPMorgan Chase, and Goldman Sachs posting notable gains following their earnings releases.
The upbeat mood in the stock market is accompanied by a decline in Treasury yields, with the 10-year yield easing to 4.76%, down from Tuesday's close.
12:08pm: Persistent price pressures
December's CPI report adds weight to the narrative of a mixed economic recovery, analysts say. While progress on inflation has been made, analysts highlight structural challenges, including labor market dynamics and global economic policy shifts, that could complicate the Federal Reserve's decisions.
To recap, US consumer prices rose in December, driven by higher costs for food and energy, according to the latest Consumer Price Index (CPI) report. Headline CPI inflation climbed 0.4% for the month, matching the strongest monthly increase of 2024. Excluding food and energy, the core CPI rose a more subdued 0.2%.
Wells Fargo noted that while core inflation remained moderate, persistently high food and energy prices underscore ongoing challenges for households and the Federal Reserve.
Elsewhere, Bill Adams, chief economist at Comerica, observed that inflation showed meaningful improvement over the past year but still fell short of the Federal Reserve's 2% target.
11:20am: Good news
Good news has arrived "in spades" in the form of softer inflation, according to Chris Beauchamp, Chief Market Analyst at online trading platform IG.
“After a shaky start to the year stocks seem to have found their footing, helped in a big way by today’s US inflation and earnings data," Beauchamp commented.
"Yesterday’s PPI data in the US raised the prospect that today’s figures wouldn’t come in too hot, and while the headline figures were slightly higher, the key core figures delivered the good news.
"Investors can live with a cautious Fed so long as inflation remains contained. Today’s news seems to support that thesis, and has seen risk appetite switch firmly back to bullish.”
9.51am: Stocks rally on soft core inflation data
Wall Street enjoyed a rally as trading got underway on Wednesday on the back of figures showing an unexpected dip in core inflation last month.
The Nasdaq surged 1.8% after the bell, while the Dow Jones and S&P 500 jumped 1.5% each.
Figures earlier on had shown headline inflation accelerated as expected to 2.9% in December, as the core rate subsided in a surprise turn to 3.2%.
Bets for rate cuts in 2025 had been dashed by the likes of strong job market data in the run-up to Wednesday inflation figures, leaving eyes on any signs that stubborn price rises were moderating.
“The market had priced out expectations of any rate cuts up to October, an impressive swing over the last couple of months,” Validus Risk Management chief investment officer Kambiz Kazemi said.
“If this number is followed by similarly stable prints, we would expect the US dollar to soften and both the market and the Fed to adopt a less hawkish tone.”
The dollar faced a sharp drop on the back of the figures, losing 0.65% to the pound and dropping 0.27% versus to euro.
Among equities, Goldman Sachs was one of the day’s major early movers, surging 5% after trouncing expectations with fourth quarter results... Read more
8.49am: Subsiding core US inflation a ‘relief’ - analyst
Subsiding core inflation in the US will spell good news for markets and any hopes for rate cuts this year, according to CMC Markets analyst Jochen Stanzl.
“This is exactly what the bulls on Wall Street were hoping for,” Stanzl said, after figures on Wednesday showed core inflation came in at 3.2% last month, against 3.3% in November.
Stanzl added the slowing rate was “a relief” and that, while the Federal Reserve’s caution on future interest rate cuts was right, there was “some hope” of at least one reduction in 2025.
“Even after today's data, the markets will probably continue to find themselves in a period in which they are adjusting to the fact that interest rates will remain higher for longer,” Stanzl said.
“The inflation data will, however, help to somewhat weaken this conviction.”
Futures had the Nasdaq rallying 1.7% ahead of the open, while the S&P 500 and Dow Jones were each seen 1.4% higher.
8.39am: US inflation accelerates as expected, core rate drops
Inflation across the United States accelerated as expected in December, figures showed on Wednesday.
According to the US Bureau of Labor Statistics, the consumer price index ticked up from 2.7% to 2.9% on an annual basis between November and December.
Core inflation, excluding energy and food prices, climbed by 3.2% in the meantime, slowing against November’s 3.3% and undershooting expectations for a flat reading.
On a monthly basis, headline inflation rose by 0.4%, compared to 0.3% in November, while the core rate slowed from 0.3% to 0.2%.
Futures continued to point to a positive open on Wall Street after the figures.
7.02am: Stocks seen gaining before inflation figures
Wall Street appeared on course for a bright start on Wednesday as traders awaited key inflation figures for December.
Futures had the Nasdaq and Dow Jones both up by 0.4% ahead of the opening bell, while the S&P 500 was seen 0.3% higher.
Wednesday’s inflation figures have drawn focus after bets for Federal Reserve rate cuts in 2025 were slashed earlier in the week following strong job market data last week.
Expectations are for inflation to have accelerated from 2.7% to 2.9% between November and December, with the core rate seen remaining flat at 3.3%.
“At the very least, the Fed will require substantial progress on disinflation before taking further action,” Tickmill Group partner Patrick Munnelly commented.
“Without that, demand remains too strong to justify any additional easing, compounded by uncertainties in trade policy.”