Wall Street: good news on the inflation front
In late morning trading, the Dow Jones gained nearly 1.5% to 43,143.6 points, while the Nasdaq Composite jumped more than 2% to 19,435.7 points.
The Labor Department announced early this morning that the CPI index rose by 2.9% in December, compared with 2.7% in November.
But 'core' CPI, which excludes energy and food, shows a deceleration in year-on-year inflation to 3.2%, from 3.3% the previous month.
"With base effects a priori favorable next month, we can imagine this decline continuing into January", reacts Bastien Drut, Head of Strategy and Economic Research at CPR AM.
This is good news for the Fed", he adds.
Investors are therefore returning to the scenario of two rate cuts this year, first in June and then in December.
According to the CME Group's FedWatch barometer, traders are now predicting a 25 basis point cut on June 18 with a probability of over 43%.
The scenario of a 50 basis point rate cut is estimated at 16.7%, while the 'status quo' hypothesis wins only 37.2% of votes.
As a sign of the easing on the markets, the CBOE Volatility Index, often referred to as a barometer of fear, fell by almost 10% to 16.9, before dropping well below the crucial 20-point mark.
This reassuring data caused the yield on ten-year Treasuries to plunge by almost 13 basis points to around 4.65%.
Good news on the inflation front was complemented by a successful start to the earnings season.
Shares in JPMorgan (+1.5%), Goldman Sachs (+5.4%), Citigroup (+6%) and Wells Fargo (+4.9%) are all on an upward trajectory following the publication of Q4 results that came in above expectations.
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