Zinger Key Points
- Headline CPI rose 2.9% year-over-year in December, while monthly inflation increased 0.4%, marking the largest rise since March 2024.
- Core CPI grew 3.2% annually, slightly below forecasts. Treasury yields fell, with the 2-year yield down 9 basis points to 4.27%.
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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 SPY – surged 1.5% in early New York trading, led by financial stocks after major banks reported strong fourth-quarter earnings.
JPMorgan Chase & Co. JPM, Citigroup Inc. C, Goldman Sachs Group Inc. GS, Wells Fargo & Co. WFC, Bank of New York Mellon Corp. BK and BlackRock Inc. BLK all topped earnings forecasts for the fourth quarter and released upbeat guidance, reiterating that the financial sector thrived heading to the end of last year.
The Financial Select Sector SPDR Fund XLF rose 2.2%, leading all S&P 500 sectors, while the SPDR S&P Regional Banking ETF 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 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 TLT gained 1.6% as bond prices rallied.
Bitcoin BTC/USD rose 2% to over $99,000, supported by rising hopes for Fed rate cuts. Gold, tracked by the SPDR Gold Trust GLD, added 0.5%.
Top Movers
S&P 500 Gainers:
- Texas Pacific Land Corp. TPL: +5.85%
- BlackRock Inc.: +5.54%
- Assurant Inc. AIZ: +5.49%
- Bio-Techne Corp. TECH: +5.36%
- Citigroup Inc.: +5.16%
Nasdaq 100 Movers:
- Copart Inc. CPRT: +4.62%
- Intuitive Surgical Inc. ISRG: +4.60%
- AppLovin Corp. APP: +4.43%
- Palantir Technologies Inc. PLTR: +4.30%
- The Trade Desk Inc. TTD: +3.39%
Top Gainers In The Invesco KBW Bank ETF KBWB:
- Citigroup Inc.: +5.27%
- Wells Fargo & Co.: +4.80%
- Bank of New York Mellon Corp.: +4.35%
- Western Alliance Bancorp. WAL: +4.13%
- Goldman Sachs Group Inc.: +4.02%
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