[New York Stock Market] Cheers for Core CPI Below Expectations... Nasdaq Surges 2.45%, Treasury Yields Plunge

December CPI Up 2.9% Year-on-Year
Core CPI Rises 3.2%, 'Below Expectations'
Eased Inflation Fears Send Treasury Yields Plunging
10-Year Yield Falls to 4.6% Range
Strong Bank Earnings, Gaza Ceasefire Also Positive Factors

The three major indices of the U.S. New York Stock Exchange all closed higher on the 15th (local time). The unexpectedly slowed core Consumer Price Index (CPI) inflation rate last month and the 'surprise earnings' of major U.S. banks fueled investors' buying sentiment. The ceasefire agreement in the Gaza war between Israel and the Palestinian armed group Hamas also stimulated investor sentiment. U.S. Treasury yields plunged sharply due to eased inflation concerns, with the 10-year yield falling to the 4.6% range.

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On that day in the New York stock market, the Dow Jones Industrial Average (Dow) focused on blue-chip stocks closed at 43,221.55, up 703.27 points (1.65%) from the previous trading day. The S&P 500, centered on large-cap stocks, rose 107 points (1.83%) to close at 5,949.91, marking the largest daily gain since November last year. The Nasdaq, focused on tech stocks, closed at 19,511.23, up 466.84 points (2.45%).

Amid renewed inflationary pressures, the core CPI inflation rate released that morning also slowed unexpectedly, spreading relief across the market.

According to the U.S. Department of Labor, the CPI in December last year rose 0.4% month-over-month and 2.9% year-over-year. Although these rates were higher than November's (0.3% and 2.7%, respectively), they matched forecasts. The core CPI, which excludes volatile energy and food prices and reflects the underlying inflation trend, rose 0.2% month-over-month and 3.2% year-over-year. Both figures were below November's rates and market expectations (0.3% and 3.3%, respectively). Notably, the month-over-month increase slowed after maintaining 0.3% for four consecutive months since August, marking the first slowdown in five months. Since the Fed places more emphasis on core CPI than overall CPI, last month's retail price inflation can be seen as lower than expected. The Producer Price Index (PPI), a wholesale price indicator released the previous day, also rose 0.2% month-over-month in December, falling short of both the previous month's increase and expert forecasts (both 0.4%).

John Cushner, Head of U.S. Securities Products and Portfolio Manager at Janus Henderson, said, "Following yesterday's PPI, today's CPI inflation indicators slightly missed expectations, allowing the market to breathe a sigh of relief." He added, "Perhaps the most important point is that today's CPI figures rule out additional rate hikes that some market participants hastily anticipated."

U.S. Treasury yields, which had soared due to inflation concerns, are now plunging. The benchmark 10-year U.S. Treasury yield fell 14 basis points (1 bp = 0.01 percentage point) from the previous trading day to 4.64%, while the 2-year Treasury yield, sensitive to monetary policy, dropped 9 basis points to 4.27%.

Chris Zaccarelli, Chief Investment Officer (CIO) at NorthLight Asset Management, said, "The stock and bond markets started the year sluggishly due to inflation fears and concerns that the Federal Reserve (Fed) might not only halt rate cuts but begin raising rates." He forecasted, "The market will be encouraged by the decline in core inflation, which will partially ease pressure on both stock and bond markets."

However, concerns about 'Trumflation' (inflation caused by Trump's policies) are growing, and inflation rates still exceed the Fed's 2% target, making it likely that the benchmark interest rate will remain unchanged for the time being. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on that day priced in a 97.3% probability that the Fed will hold rates steady at the Federal Open Market Committee (FOMC) meeting scheduled for the 28th-29th. The probabilities of rate holds in March and May are 72% and 55.9%, respectively.

The surprise earnings of major banks also stimulated investor sentiment. JPMorgan Chase's net profit in the fourth quarter of last year increased by 50% compared to the same period the previous year. Goldman Sachs reported earnings per share (EPS) of $11.95, and Citigroup posted $1.34 in the fourth quarter, both significantly exceeding analysts' expectations ($8.22 and $1.22, respectively).

Larry Tentarelli, Senior Technical Strategist at Blue Chip Daily Trends Report, said, "The earnings season started smoothly on this day." He analyzed, "Bank earnings are important because the financial sector is closely linked to the general economy, and the strong performance of major banks can be seen as a good sign."

By stock, banking shares all rose. JPMorgan increased by 1.97%. Goldman Sachs and Citigroup surged 6% and 6.49%, respectively. Tesla jumped 8.04%. Nvidia rose 3.37%, while Apple and Microsoft (MS) gained 1.97% and 2.56%, respectively. Meta, Facebook's parent company, increased by 3.85%.

International oil prices surged despite the Gaza ceasefire news. Concerns over supply due to additional U.S. sanctions on Russian crude oil, combined with a decrease in U.S. crude inventories, added to the impact. West Texas Intermediate (WTI) crude closed at $80.04 per barrel, up $2.54 (3.28%) from the previous day, marking the highest level since July last year. Brent crude, the global oil price benchmark, closed at $82.03 per barrel, up $2.11 (2.64%), reaching its highest level since August last year.