JANUARY 15, 2025
- US stocks ripped higher Wednesday after strong bank earnings results and encouraging inflation data.
- The bond sell-off also saw some relief as yields tumbled.
- The moves mark a recalibration in the Fed’s path for rates.
US stocks rallied sharply on Wednesday as traders took in encouraging inflation data and strong earnings from Wall Street banks.
The sell-off in bonds also got some relief as the 10-year Treasury yield tumbled as many as 16 basis points. The move offers some relief to equity investors who have been nervously watching the 10-year note as it approaches the psychologically significant 5% threshold, which has historically been a sell signal.
The bright spot in Wednesday’s data was core inflation — which strips out food and energy prices — coming in lower than expected. It soothed investor worries about persistently high consumer prices, at least temporarily. That concern has informed a sharp run-up in bond yields, as investors have pared back expectations of rate cuts in 2025, with some even surmising a hike could be the next move.
On the bank-earnings front, Goldman Sachs, JPMorgan, and BlackRock results all came in above expectations, fueled by strong trading-desk performance.
Here’s where US indexes stood at the 4 p.m. closing bell on Wednesday:
- S&P 500: 5,949.91, up 1.83%.
- Dow Jones Industrial Average: 43,221.55, up 1.65% (703.27 points).
- Nasdaq composite: 19,511.23, up 2.45%.
- 10-year Treasury yield: 4.647%, down 14 basis points.
Investors are largely expecting the Federal Reserve to pause its rate-cutting cycle this month. But the probability that the Fed will cut interest rates by 25 basis points twice this year rose Wednesday, with markets seeing a 30% chance rates will end the year 50 basis points lower from current levels, according to the CME FedWatch tool, up from a 24% probability on Tuesday.
“Wednesday’s softer-than-expected CPI print offers some relief, especially after last Friday’s hot employment numbers, that the Fed may be able to still cut interest rates in 2025,” Skyler Weinand, the chief investment officer of Regan Capital, said in a statement. “Even if the Fed cuts rates in 2025, it’s likely to be six to eight months away, as we are still too far from the Fed’s inflation target for the Fed to continue their rate cut march anytime soon.”
“The Fed can be patient and the economy is healthy,” Scott Helfstein, the head of investment strategy at Global X, said. “This is not a time to run for the hills.”
Here’s what else is going on:
- Here’s how the LA wildfires could influence the economy, according to Goldman Sachs.
- Bitcoin could drop 17% from its current levels once this key support level has been breached, according to Standard Chartered.
- Russia is on track to run out of financial reserves by this fall, which could cripple its war efforts.
- Here’s why it’s time for the software sector to shine, according to Bank of America.
In commodities, bonds, and crypto:
- West Texas Intermediate crude oil rose 3.95% to $80.56 a barrel.
- Brent crude, the international benchmark, edged up 0.59% to $82.51 a barrel.
- Gold increased 0.69% to $2,695 an ounce.
- Bitcoin rose 3.38% to $99,725.
Courtesy/Source: Business Insider / Market Insider
