Wall St jumps on optimism ahead of key inflation report

NEW YORK, Jan 11 (Reuters) – U.S. stocks closed with strong gains on Wednesday, led by a jump in the Nasdaq as investors were bullish ahead of an inflation report that could give the Federal Reserve some leeway to reverse its aggressive interest rate hikes. .

According to projections by economists polled by Reuters, the much-anticipated report due Thursday is expected to show that consumer prices in the United States probably rose 6.5% year-on-year in December, compared with a 7.1% increase in november.

Among the sectors, Real Estate (.SPLRCR) and Consumer Discretionary (.SPLRCD) were the best performers on the day.

The S&P 500 is up so far for 2023 after falling sharply last year. Hopes that the Fed could soon pause its cycle of rate hikes has buoyed the market in recent sessions, although comments from some Fed officials have supported the view that the central bank needs to remain aggressive in the raising interest rates to fight inflation.

“Investors expect us to be closer to a break than at any time last year,” said Jake Dollarhide, managing director of Longbow Asset Management in Tulsa, Oklahoma. He said it would be well received by the market.

Plus, “whenever you have a slack year, it’s not surprising to see a reversal several times at the start of the new year,” he said.

According to preliminary data, the S&P 500 (.SPX) gained 50.06 points, or 1.28%, to end at 3,969.50 points, while the Nasdaq Composite (.IXIC) gained 189.07 points, or 1.76%, to 10,931.70. The Dow Jones Industrial Average (.DJI) rose 263.24 points, or 0.78%, to 33,967.34.

Money market participants see a 75% chance that the Fed will raise the benchmark rate by 25 basis points in February.

This week also marks the start of the fourth quarter earnings season for S&P 500 companies, with overall S&P 500 earnings expected to decline year over year.

The biggest U.S. banks, which kick off the season later this week, are expected to report lower quarterly earnings as risks of a recession rise due to tighter monetary policy.

Goldman Sachs (GS.N) began laying off staff on Wednesday as part of a sweeping cost-cutting campaign, a source familiar with the matter said.

Retailer Bed Bath & Beyond Inc (BBBY.O) has boosted recent earnings sharply despite dismal quarterly results, with some investors speculating it could be a potential acquisition target.

Reporting by Caroline Valetkevitch; Additional reporting by Shubham Batra and Amruta Khandekar in Bengaluru; Editing by Shounak Dasgupta and Grant McCool

Our standards: The Thomson Reuters Trust Principles.