Updates to afternoon US trading
By Chuck Mikolajczak
NEW YORK, Jan 15 (Reuters) - U.S. stocks surged on Wednesday, with all three major indexes on track for their biggest daily percentage gains in more than two months, as lower-than-expected December core inflation data and solid earnings from major U.S. banks fueled a rally.
The Labor Department said the consumer price index (CPI) increased the most in nine months as energy costs rose, although a measure of underlying inflation pressures subsided.
Data on Tuesday showed the producer price index (PPI) rose less than expected.
"We've gotten so puckered over the fact that rates might be going up and this is going to be a problem and the UK won't be able to borrow money and oh, our deficit, and so everyone was kind of wound up," said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco.
"The CPI number and the PPI number - they're not super cool, but they're certainly not hot - and certainly it leads one to believe that the embers of inflation are dying."
The Dow Jones Industrial Average .DJI rose 703.31 points, or 1.65%, to 43,221.59, the S&P 500 .SPX advanced 104.70 points, or 1.79%, to 5,947.61 and the Nasdaq Composite .IXIC climbed 450.61 points, or 2.37%, to 19,495.00.
All three major indexes were on track for their biggest daily percentage gain since Nov. 6 as was the domestically focused Russell 2000 .RUT index of small-cap stocks, which jumped 1.82%.
Stocks have struggled recently following a post-U.S. election rally, with the S&P 500 falling in four of the previous five weeks. A resilient economy, nagging inflation and comments from Federal Reserve policymakers have fanned worries about the central bank being less aggressive in cutting interest rates than previously anticipated.
Concerns linger about potential tariffs from President-elect Donald Trump's incoming administration that would further stoke inflation.
But expectations for more Fed rate cuts this year increased following the CPI data, along with odds for a cut of at least 25 basis points at the June Fed meeting.
Fed officials said on Wednesday the recent inflation data was helpful but noted uncertainty in the coming months as they await policies from the incoming Trump administration.
The Fed's Beige Book showed economic activity increased slightly to moderately in late November and December, with employment ticking up and prices rising moderately amid concerns about the potential impact of policies.
The benchmark Treasury note yield US10YT=RR tumbled from a 14-month high of 4.809% hit earlier this week and was last down 13.7 bps at 4.651%.
Also providing support were earnings from large banks, with JPMorgan JPM.N up 1.94% after it reported a record annual profit from rebounding markets in the fourth quarter. Wells Fargo WFC.N jumped 6.76% after its fourth-quarter profit beat Street expectations as a surge in dealmaking activity boosted its investment banking business.
Goldman Sachs advanced nearly 6% as the top boost to the Dow Industrials following its best quarterly profit since the third quarter of 2021 and Citigroup shot up 6.84% after it swung to a profit in the fourth quarter.
Relief came from a long-awaited ceasefire deal between Israel and Hamas paved the way to potentially ending the 15-month-long Gaza war that has upended the Middle East.
Advancing issues outnumbered decliners by a 6.46-to-1 ratio on the NYSE, and by a 3.17-to-1 ratio on the Nasdaq.
The S&P 500 posted 20 new 52-week highs and nine new lows, while the Nasdaq Composite recorded 55 new highs and 79 new lows.
(Reporting by Chuck Mikolajczak; Additional reporting by Johann M Cherian, Medha Singh and Sukriti Gupta in Bengaluru; Editing by Richard Chang)
((charles.mikolajczak@tr.com; @ChuckMik))