Major indices rallied on Wednesday after December inflation data showed underlying price pressures slowing, reducing fears of a prolonged pause in interest rate cuts by the Federal Reserve.
The headline Consumer Price Index rose 2.9% year-over-year in December, up from November's 2.7%, matching economist forecasts. On a monthly basis, headline inflation increased 0.4%, accelerating from the 0.3% surge in November and marking the largest monthly rise since March 2024.
Core inflation, which excludes volatile food and energy prices, rose 3.2% year-over-year, slightly below the expected 3.3%. Month-over-month, core prices gained 0.2%, in line with forecasts.
The inflation data boosted expectations for Fed rate cuts in 2025. The probability of a rate cut by June rose to 68% from 55% the previous day, with December futures now indicating a 58% chance of two cuts by year-end.
Wall Street Gains As Bond Yields Retreat, Financial Stocks Soar
The S&P 500 index – as tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY) – surged 1.5% in early New York trading, led by financial stocks after major banks reported strong fourth-quarter earnings.
The Financial Select Sector SPDR Fund (NYSE:XLF) rose 2.2%, leading all S&P 500 sectors, while the SPDR S&P Regional Banking ETF (NYSE:KRE) jumped 3.4%, reflecting strong performance among regional banks.
The Dow rose 1.6%, while the Russell 2000 index outperformed, climbing 2.6%. Tech stocks, tracked by the Invesco QQQ Trust, Series 1 (NASDAQ:QQQ), gained 1.7%, boosted by falling Treasury yields.
Yields on the policy-sensitive 2-year Treasury note fell 9 basis points to 4.27%, while 30-year yields dropped 9 basis points to 4.88%. The iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) gained 1.6% as bond prices rallied.
Bitcoin (CRYPTO: BTC) rose 2% to over $99,000, supported by rising hopes for Fed rate cuts. Gold, tracked by the SPDR Gold Trust (NYSE:GLD), added 0.5%.
Top Movers
S&P 500 Gainers:
Nasdaq 100 Movers:
Top Gainers In The Invesco KBW Bank ETF (NYSE:KBWB):
- Citigroup Inc.: +5.27%
- Wells Fargo & Co.: +4.80%
- Bank of New York Mellon Corp.: +4.35%
- Western Alliance Bancorp. (NYSE:WAL): +4.13%
- Goldman Sachs Group Inc.: +4.02%
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