Dow, S&P 500, Nasdaq rise as inflation slows, bank earnings shine

Oil prices rose on Wednesday as US crude inventories fell for an eighth straight week.

West Texas Intermediate (CL=F) rose more than 2.5% to trade around $79.50 a barrel, while Brent (BZ=F), the international benchmark, rose 2% to hover above $81.

Oil rose as U.S. inventories fell by 1.96 million barrels last week to the lowest level since April, according to the latest Energy Information Administration data released Wednesday. Meanwhile, gasoline inventories hit their highest level in a year.

Crude oil has been rising recently after the United States announced broad-based sanctions against oil producer Russia in an effort to cut off Moscow’s revenues amid the ongoing war in Ukraine.

Last Friday, a warmer-than-expected December jobs report spooked the market and introduced a discussion about the Federal Reserve not cutting interest rates at all or possibly raising them at some point.

Economists broadly argued that the job cuts intensified focus on whether inflation will begin to show signs of easing that could prompt the Fed to cut interest rates in 2025. Early evidence of that trend emerged in Wednesday’s consumer price index (CPI) release.

On a “core” basis, which strips out the more volatile costs of food and gas, prices rose 3.2% compared with a year earlier. This marked the first decline in core CPI since July.

While economists do not believe this data will push the Federal Reserve to cut rates at its January meeting, many see a path to rate cuts later in 2025.

Citi economist Veronica Clark wrote in a note to clients Wednesday that markets have “overestimated the stickiness of inflation.”

“Details of December data should also be encouraging for further (Fed) easing, with many components broadly as expected and in line with pre-pandemic norms,” ​​Clark wrote.

“Weaker inflation should give the Fed more confidence that the recent acceleration was just a blip,” Morgan Stanley chief U.S. economist Michael Gapen wrote. “This pressure is consistent with our call for a rate cut in March.”

JPMorgan ( JPM ) shares traded just above the flat line on Wednesday despite a big profit boost for America’s biggest bank.

Yahoo Finance’s David Hollerith reports:

Last year, JPMorgan Chase (JPM) pulled out more profit than it ever did before when it earned $14 billion in the last quarter of 2024.

Its full-year profit rose to $58 billion, an all-time record for JPMorgan and the largest ever in U.S. banking history. Its profit in the fourth quarter was up 50% from the same period last year.

Those results were supported by an increase in JPMorgan’s Wall Street activity as dealmaking makes a comeback in the industry after a two-year drought. JPMorgan’s investment banking revenue was up 49% year over year.

Read more here.

A broad-based rally in stocks took hold at the opening of Wednesday’s trading session on Wall Street.

All 11 sectors were in the green with interest rate sensitive sectors such as Real Estate (XLRE) and Utilities (XLU) leading the way. Five sectors outperformed the S&P 500’s (^GSPC) gain of 1.3%.

A recent headwind for stocks died Wednesday morning.

The 10-year Treasury yield ( ^TNX ), which had been at its highest level in more than a year, fell more than 12 basis points to 4.66% after cooler-than-expected consumer inflation.

Meanwhile, stocks rose, with futures tied to the major averages all up 1.5% or more.

Fresh consumer inflation data out on Wednesday showed that prices rose less than expected in December.

The consumer price index data from the Bureau of Labor Statistics showed that prices on a “core” basis — which strips out the more volatile costs of food and gas — rose 0.2% month-over-month. It was lower than the 0.3% economists had expected.

On an annual basis, core prices rose 3.2%, below the 3.3% economists had predicted. It was the first move lower in the metric since July.

Headline CPI rose 2.9% year-on-year in December, up from 2.7% in November, but in line with economists’ expectations. The index rose 0.4% from the previous month, topping the 0.2% increase seen in November and also in line with ‘ estimates.

Yours truly is getting ready to head out for another week of impactful reporting at the World Economic Forum in Davos, Switzerland – starting next Monday. I’ll have more to say about what we’ll be doing there in Sunday’s Morning Brief newsletter.

I will quickly note that a source familiar with the matter tells me that President Trump will speak via video feed on Thursday, just days after his inauguration (and perhaps a flurry of executive orders).

But before the fun, I thought WEF’s annual global risk report that dropped this morning is interesting reading. The biggest risk is “state-based armed conflict.” Other top risks include misinformation and disinformation (good to see Zuck no longer fact-checks at Meta…), extreme weather events, societal polarization, cyberespionage, and warfare.

Mind you many of these risks are not priced into Mag 7 shares!

“Rising geopolitical tensions and a breakdown in trust are driving the global risk landscape,” WEF Executive Director Mirek Dušek said in a statement. “In this complex and dynamic context, leaders have a choice: find ways to foster collaboration and resilience, or face increased vulnerabilities.”