The Dow soars 600 points as inflation cools and bank earnings slay

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) stock rose after reporting earnings per share of $4.81 for the last quarter, surpassing the expected $4.11. Shares of Wells Fargo (WFC), Goldman Sachs (GS), and Citigroup (C) were also up after beating the quarterly estimates.