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U.S. stocks rose to their best day since Donald Trump’s election victory after data showed underlying price pressures eased in the world’s biggest economy and Wall Street banks reported strong quarterly results.
The S&P 500 rose 1.8 percent, while the tech-rich Nasdaq Composite jumped 2.5 percent. Those gains marked the best day for stocks since Nov. 6, the day after the US election.
Banks were among the biggest gainers on Wednesday after several of Wall Street’s biggest lenders reported big rises in quarterly profit, driven by strength in investment banking and trading. Citigroup, Goldman Sachs and Wells Fargo jumped about 6 percent.
Investors also relied on figures from the Bureau of Labor Statistics showing that headline annual inflation rose in line with expectations to 2.9 percent in December from 2.7 percent in November.
But the core inflationwhich strips out volatile food and energy costs, unexpectedly fell to 3.2 percent from 3.3 percent a month earlier.
Markets have fallen in recent weeks as investors have lowered expectations of a rate cut by the Federal Reserve in anticipation of President-elect Trump’s economic policies, which some fear will be inflationary.
“Today’s CPI should provide a boost to markets, easing some of the anxiety that the US is at the start of a second wave of inflation,” said Seema Shah, chief global strategist at Principal Asset Management.
The politically sensitive two-year Treasury yield, which closely tracks interest rate expectations, fell 0.1 percentage point to 4.27 percent, while the 10-year yield — a benchmark for global borrowing costs — fell 0.14 percentage point to 4.65 percent. . Yields fall as prices rise.
The value of the dollar against six other currencies fell by 0.2 percent.
Investors were betting that the Fed would deliver its first rate cut of the year by a quarter point in July, compared to September before the data was released.
Fed officials have signaled that they plan to take a “cautious approach” to cutting rates amid concerns that inflation may not ease quickly to the central bank’s 2 percent target.
Mark Cabana, head of U.S. interest rate strategy at Bank of America, said the inflation data, particularly the core number, was likely to “modestly increase” the Fed’s “confidence that inflation will continue to fall.” But he added that policymakers are likely “still generally frustrated by the slowing pace of progress on the inflation front.”
Most investors and analysts believe the Fed will not cut rates again at its next policy meeting later this month. US central bankers have signaled in their own projections that they will only cut rates by an additional 50 basis points this year.
Trump, who takes office on Monday, has outlined aggressive plans to impose tariffs on large swaths of imports, implement sweeping crackdowns on undocumented immigrants and enact sweeping tax cuts.
Economists have warned that such plans could further fuel inflation.
“The real question mark around inflation this year is not what the economy can do about inflation or what the trend is before the Trump administration takes over,” said David Kelly, chief global strategist at JPMorgan Asset Management. “What Will New Tariff, Immigration and Fiscal Policies Mean for Inflation?”