Dow soars 500 points, S&P, Nasdaq rise over 1.3% after inflation data, strong bank earnings

Wall Street's main indexes surged on Wednesday, with the benchmark S&P 500 at a one-week high, propelled by lower-than-expected core inflation data for December and robust quarterly earnings from the biggest U.S. banks.

At 11:37 a.m. ET, the Dow Jones Industrial Average rose 570.93 points, or 1.34%, to 43,089.21, the S&P 500 gained 80.82 points, or 1.38%, to 5,923.73 and the Nasdaq Composite gained 356.93 points, or 1.87%, to 19,401.33.

The domestically focused small-cap Russell 2000 index jumped 2.3%.

A Labor Department report showed the consumer price index rose in line with expectations in December. Still, markets were focused on core CPI figures, which advanced 3.2%, lower than estimates of a 3.3% rise.

Traders were pricing nearly even odds that the Federal Reserve will cut interest rates twice by the end of 2025, with the first reduction to come in June.

The yield on the benchmark Treasury note dipped from its 14-month high and was last at 4.64%, aiding a 2.2% gain in real estate stocks, which led advances among the 11 S&P 500 sectors.

Markets were also focused on quarterly earnings from major banks.

JPMorgan Chase & Co climbed 0.6% after the lending giant posted a record annual profit in the fourth quarter, while Wells Fargo added 4.2% after its fourth-quarter profit beat Street expectations as a rebound in dealmaking activity boosted its investment banking business.

Goldman Sachs gained 4.9% after posting its best quarterly profit since the third quarter of 2021, while Citigroup swung to a profit in the fourth quarter, sending its shares up 3.9%.

"It's a confluence of two bullish factors," said Adam Sarhan, chief executive of 50 Park Investments.

"One, you've got inflation that is not out of control, so it leaves the door open for more easy money from the Fed. And two, you have earnings from the big banks, which are coming in so far as being bullish."

The S&P 500 banks Index rose 1.9%, setting it on track to log gains of about 5% in January. The index has outperformed Wall Street's main indexes, which are poised to notch modest gains for the month, including Wednesday's advances.

In 2024, the banking index logged its biggest annual jump since 2019 on expectations that U.S. President-elect Donald Trump's policies, such as tax cuts and loose regulations, could boost the financial sector.

Of the 28 companies in the S&P 500 that have reported fourth-quarter earnings to date, 82.1% have surpassed estimates, according to data compiled by LSEG.

Remarks from New York Fed President John Williams and Chicago Fed President Austan Goolsbee will be parsed later in the day. The central bank is also slated to unveil its beige book on economic activity at 2:00 p.m. ET.

BlackRock rose 3.9% after its assets hit a record high of $11.6 trillion in the fourth quarter.

Advancing issues outnumbered decliners by a 13.19-to-1 ratio on the NYSE, and by a 4.74-to-1 ratio on the Nasdaq.

The S&P 500 posted 13 new 52-week highs and no new lows, while the Nasdaq Composite recorded 37 new highs and 25 new lows.