Stocks Rally as Inflation Cools and Bank Earnings Shine

U.S. stocks experienced significant gains on Wednesday, driven by lower-than-expected inflation data and strong earnings from major banks. The Dow, S&P 500, and Nasdaq all saw their biggest daily percentage increases in over two months. Economic concerns remain, though optimism about further Fed rate cuts persists.

In a significant surge on Wednesday, U.S. stocks reached new heights, with all three major indexes reporting their largest daily percentage gains in over two months. This rally was fueled by lower-than-expected core inflation data for December and robust earnings reports from major U.S. banks.

The Labor Department's latest figures revealed a nine-month high increase in the consumer price index, primarily due to rising energy costs, though underlying inflation pressures showed signs of easing. Meanwhile, the producer price index climbed less than anticipated, further bolstering investor sentiment.

Earnings reports added to the optimistic mood, with banking giants such as JPMorgan, Wells Fargo, and Goldman Sachs posting impressive profits, reflecting a strong investment banking business and rebounding markets. As expectations rise for additional Federal Reserve rate cuts, market participants remain watchful of the economic policies from the incoming Trump administration.

(With inputs from agencies.)