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The Dow surged 600 points after the latest core inflation report indicated a slowdown, bolstered further by strong banking earnings.
According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) for December increased by 0.4%, slightly higher than the anticipated 0.3%. This rise brought the 12-month inflation rate to 2.9%, which aligns with expectations. In contrast, the core CPI, excluding the more volatile food and energy prices, saw a monthly increase of 0.2%, below the expected 0.3%. Additionally, the year-over-year core CPI rose by 3.2%, also cooler than 3.3% forecasted.
The favorable retail inflation figures, combined with a lower-than-anticipated producer price index (PPI) report from the previous day, indicate that the Federal Reserve is nearing its 2% inflation goal. These reports also bolster optimism regarding potential interest rate reductions later this year.
In the afternoon, the Dow Jones Industrial Average jumped 645 points, or 1.5%. The tech-heavy Nasdaq and S&P 500 added 2.1% and 1.6%, respectively. Meanwhile, the 10-year Treasury yield dropped to 4.686%.
Shares of banking giants are up
Major banking firms released their financial reports this morning, and most of their earnings exceeded expectations. JPMorgan’s (JPM+0.85%) stock rose after reporting earnings per share of $4.81 for the last quarter, surpassing the expected $4.11. Shares of Wells Fargo (WFC+0.89%), Goldman Sachs (GS+1.20%), and Citigroup (C-0.01%) were also up after beating the quarterly estimates.