Wall Street closed sharply higher on Wednesday, driven by tech, discretionary and financial stocks. Inflation data released on the day boosted investor mood. All three most widely followed indexes closed the session firmly in the green while registering their biggest daily percentage gains since Nov. 6.

How Did the Benchmarks Perform?

The Dow Jones Industrial Average (DJI) rose 1.7%, or 703.27 points, to close at 43,221.55. Twenty three components of the 30-stock index ended in positive territory, while seven ended in negative.

The tech-heavy Nasdaq Composite advanced 466.84 points, or 2.5%, to close at 19,511.23.

The S&P 500 gained 107.00 points, or 1.8%, to close at 5,949.91. Ten of the 11 broad sectors of the benchmark index closed in the green. The Financials Select Sector SPDR (XLF), the Consumer Discretionary Select Sector SPDR (XLY) and the Technology Select Sector SPDR (XLK) advanced 2.6%, 2.5% and 2%, respectively, while the Consumer Staples Select Sector SPDR (XLP) declined 0.3%.

The fear-gauge CBOE Volatility Index (VIX) decreased 13.8% to 16.12. A total of 14.3 billion shares were traded on Wednesday, lower than the last 20-session average of 15.8 billion. Advancers outnumbered decliners by a 5.49-to-1 ratio on the NYSE, while on the Nasdaq Composite, advancing issues had a 3.19-to-1 advantage.

U.S. 10-Year Treasury Yield Comes Down From 14-Month High

U.S. 10-year treasury yields fell from the 14-month high level they have been hovering around over the previous few sessions, settling near 4.657%. Earlier in the week, they had peaked at 4.809%.

Israel and Hamas Reach Ceasefire Deal

Per reports, Israel and Hamas have finally reached a deal for a ceasefire in Gaza that would take effect on Sunday and involves the releasing of hostages. This would end, albeit temporarily, the 15-month-long bloodshed that started on a fated October day in 2023. The deal provides a six-week initial ceasefire with the gradual withdrawal of Israeli forces from the Gaza Strip. Hostage exchange will also take place. This was one of the major geopolitical developments that lifted investor morale on Wednesday.

Consumer Price Index Drives Markets

The Consumer Price Index for All Urban Consumers (“CPI”) increased 0.4% on a seasonally adjusted basis in December, after rising 0.3% in November, per the U.S. Bureau of Labor Statistics. The index for all items less food and energy, better known as core CPI, rose 0.2% in December after increasing 0.3% in each of the previous four months.

This inflation report has boosted investor confidence in a variety of ways. First of all, core inflation has down from expected lines that it has been clutching on to in the recent past. And yet, headline inflation has come in the highest in nine months, thereby raising expectations that there would be more rate cuts in 2025 than promised by the Fed currently. There is wide consensus that the first rate cut in 2025 would be announced by the Fed at its June meeting.

As a result, tech and discretionary stocks got the biggest boost in a broad-based market revival. Consequently, shares of Amazon.com, Inc. AMZN and NVIDIA Corporation NVDA jumped 2.6% and 3.4%, respectively. Amazon currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Economic Data

Per the Fed’s New York Empire State Manufacturing Survey, the index for January 2025 was a negative 12.6. In December, the it was 2.1.

Per a government report, for the week ended Jan. 10, 2025, U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2 million barrels. In the prior week, they had decreased by 1 million barrels.

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