Latest US inflation data spur market rally
Market Recap: Bulls Take Charge Again
Slower inflation growth and strong earnings from big banks gave the stock market a boost. Sectors like technology, finance, and cryptocurrencies led the way.
In the S&P 500, 10 out of 11 sectors ended the day in positive territory. Financial stocks were the biggest winners, climbing 2.55%, while consumer staples were the only sector to fall, down 0.34%.
Inflation Update (CPI)
The Consumer Price Index (CPI) for December showed:
- Prices increased 0.4% compared to November.
- Inflation grew 2.9% over the past year, slightly higher than the 2.7% we saw the month before.
Core inflation (which excludes volatile items like food and energy) was up 3.2% year-over-year—just below expectations of 3.3%. Housing costs, which make up a large part of CPI, rose 4.6%, the smallest yearly increase since January 2022.
Investors were relieved that inflation didn’t spike higher, which means the Federal Reserve (the Fed) likely won’t raise interest rates anytime soon.
What’s Next for the Fed?
The Fed has a meeting on January 29, but today’s data makes it more likely they’ll keep interest rates steady. This has been their plan for months, and it may now extend into March.
Market Movers
The CPI report caused the 10-year Treasury yield (an important interest rate) to drop to 4.65%. Lower yields helped growth stocks like Tesla (+8%) and Nvidia (+3%) see big gains.
On top of that, major US banks kicked off earnings season with strong results, exceeding Wall Street expectations. This added more fuel to the stock market rally.
Here are Wednesday's closing prices:
| S&P 500 | 5,950 | +1.83% |
| Nasdaq | 19,511 | +2.45% |
| Russell 2000 | 2,263 | +1.99% |
| Dow Jones | 43,222 | +1.99% |