US stocks surged on Wednesday, fueled by optimism stemming from a better-than-expected inflation report. The S&P 500 climbed 1.8 percent, the Dow Jones Industrial Average gained 703 points, or 1.7 percent, and the Nasdaq composite soared 2.5 percent, marking their best day in two months.
US stocks surged on Wednesday, fueled by optimism stemming from a better-than-expected inflation report. The S&P 500 climbed 1.8 percent, the Dow Jones Industrial Average gained 703 points, or 1.7 percent, and the Nasdaq composite soared 2.5 percent, marking their best day in two months. The positive market reaction was driven by data showing that US inflation accelerated to 2.9 percent in December from 2.7 percent in November.
While a rise in inflation is generally undesirable, the underlying inflation trend, which excludes volatile food and energy prices, slowed to 3.2 percent, exceeding economists' expectations of 3.3 percent. This moderation in core inflation is particularly encouraging for the Federal Reserve, which closely monitors this indicator in its decision-making process.The Fed's primary objective is to bring inflation down to its 2 percent target. Although Wednesday's data is unlikely to sway the Fed's decision to keep interest rates steady at its upcoming meeting, it could pave the way for potential rate cuts later in the year if inflation continues to show signs of cooling. Traders have been increasingly volatile in recent weeks, grappling with shifting expectations about the Fed's future monetary policy. Meanwhile, bank stocks played a significant role in propelling the market higher, as several major banks reported stronger-than-anticipated profits for the final quarter of 2024. Wells Fargo, Citigroup, and Goldman Sachs all experienced substantial gains, providing a boost to the broader market. Additionally, companies that stand to benefit from lower interest rates, such as those in the housing sector, also saw their stocks rise
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