It’s alive!
After a slow start to the year, the stock market finally showed signs of life thanks to blowout bank earnings and better-than-expected inflation data. The S&P 500 finished Wednesday up 1.83%, while the Dow (1.65%) and tech-heavy Nasdaq composite (2.45%) posted strong days.
Let’s start with Wall Street. Big US banks represent the unofficial kickoff to earnings season, and they didn’t disappoint. JPMorgan, Goldman Sachs, Citigroup, and Wells Fargo all beat analysts expectations.
JPMorgan saw a 50% year-over-year increase in profits for the fourth quarter while Goldman’s profits jumped an incredible 105%. The banking boom was largely driven by classic Wall Street businesses like corporate dealmaking, capital raising, and trading.
December’s inflation report also put extra wind in the market’s sails.
At first glance — inflation rose for the third straight month — the reading might not seem great. But a closer look showed the consumer price index’s year-over-year increase matched consensus expectations, which is good.
What’s even better, though, is core inflation, which strips out volatile food and energy prices, was slightly below expectations. It also came in lower than November’s number.
Before you get ahead of yourself, don’t expect a slew of rate cuts. Instead, the data calmed investors’ nerves by slowing the troubling rise of the 10-year Treasury yield, which dropped 0.14%.
“Core Inflation isn’t accelerating and that’s the story. The market may have had its hair on fire about inflation running away again, but the data do not support that conclusion,” said Jamie Cox, Managing Partner for Harris Financial Group.
