Wall Street ended the day on a high note Wednesday, with the three main stock indexes achieving their biggest daily percentage increases since November 6. Investors were buoyed by ongoing signs of slowing inflation and robust corporate earnings.
The continued deceleration in core inflation has been a relief for investors, who had concerns about a potential resurgence in inflation, particularly as recent data indicated a strong economy. Holiday shopping figures were better than the previous year, per Mastercard reports, and the U.S. Department of Labor announced a significant job increase of 256,000 in December, lowering the unemployment rate to 4.1% from 4.2%.
Following this batch of positive economic reports, expectations for further rate reductions by the Federal Reserve have significantly decreased. Economists at Bank of America now believe that the cycle of rate cuts has concluded and anticipate potential rate increases by the Fed.
“Core inflation isn’t picking up speed, and that’s really the key takeaway,” remarked Jamie Cox, managing partner at Harris Financial Group. “There were fears about inflation spiraling out of control again, but the current data simply doesn’t back that up.”
Additionally, strong earnings reports from major financial institutions like Goldman Sachs and Citigroup, marking the start of the earnings season, further fueled stock market gains.
The broader S&P 500 index climbed 1.83% to close at 5,949.91; the Dow Jones Industrial Average increased by 703.27 points, or 1.65%, to finish at 43,221.55; and the Nasdaq Composite rose 2.45% to end at 19,511.23. Meanwhile, the benchmark 10-year yield dropped to 4.651% from a 14-month peak of 4.809% earlier in the week.
Banks lend a boost
Strong quarterly earnings from major banks, alongside the latest consumer inflation report, provided key drivers for Wednesday’s market surge, according to analysts.
“With robust quarterly outcomes from U.S. banks and a non-threatening inflation report, the stage was set for a strong trading day,” noted Jochen Stanzl, chief market analyst at CMC Markets. “We’re observing declines in (inflation) rates exactly where it’s most needed, in the core inflation, which is exactly what Wall Street bulls were hoping for.”
Notable banks reporting strong quarterly results included:
- JPMorgan Chase & Co reported record profits for the fourth quarter.
- Wells Fargo exceeded analysts’ expectations for fourth-quarter profits, aided by a recovery in dealmaking which boosted its investment banking sector.
- Goldman Sachs recorded its highest quarterly profit since the third quarter of 2021.
- Citigroup reported a shift to profit in the fourth quarter from a loss in the previous year, driven by strong investment banking performance and announced a $20 billion stock buyback.
Separately, investment powerhouse BlackRock reported a record high of $11.6 trillion in assets under management for the fourth quarter.
Shares in quantum computing firms like D-Wave Quantum and Rigetti Computing soared after Microsoft declared 2025 as the year to get “quantum-ready.”
Bitcoin also saw a significant rise, climbing 3.29% to reach $99,742.67 by day’s end, nearing the psychologically important $100,000 mark and marking its highest point since January 7.
(This story has been updated with new information.)
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Passionate about analyzing economic markets, Alice M. Carter joined THE NORTHERN FORUM with a mission: to make financial concepts accessible to everyone. With over 10 years of experience in economic journalism, she specializes in global economic trends and US financial policies. She firmly believes that a better understanding of the economy is the key to a more informed future.