STORY: U.S. stocks rallied on Wednesday, with all three of Wall Street's main indexes registering their biggest daily percentage gains in more than two months, after the latest inflation data boosted investors' hopes of more rate cuts by the Federal Reserve.
The Dow gained more than 1.6%, the S&P 500 added more than 1.8% and the Nasdaq soared nearly 2.5%.
The Labor Department's consumer price index showed that underlying inflation pressures eased in December.
That came on the heels of Tuesday's producer price index, measuring wholesale costs, which rose less than expected.
Investors are now pricing in even odds of two rate cuts this year.
But Jay Hatfield, CEO of Infrastructure Capital Advisors, thinks there will be more.
"We think the Fed will need to cut at least three or more times, for two reasons. #1, we're forecasting PCE core rolls down rapidly after the first quarter to 2.4 [percent] and then slowly goes to 2 [percent] at the end of the year. But #2, we're in a housing recession. And with rates as high as they are now - 30 year mortgage is above 3 [percent] - that recession's going to worsen. And that'll eventually hit employment, which will get the Fed's attention. So they don't know it yet, but they're going to have to cut three or four times this year."
The yield on the benchmark 10-year Treasury note tumbled nearly 14 basis points from a 14-month high of 4.8% hit earlier this week.
Also boosting stocks Wednesday, earnings from big banks, with shares of JPMorgan rising about 2% on a record annual profit as markets rebounded in the fourth quarter.
Shares of Wells Fargo jumped 6.7% after the bank's fourth-quarter profit beat Wall Street's expectations as a surge in dealmaking activity boosted its investment banking business.
Shares of Citigroup shot up 6.5% after the bank's earnings report showed it swung to a profit in the fourth quarter.
And shares of Goldman Sachs jumped 6% following the investment bank's best quarterly profit since the third quarter of 2021.