Stocks Wipe Out CPI-Fueled Gains as JPMorgan Sinks: Markets Wrap

(Bloomberg) — Wall Street traders left stocks churning as inflation data failed to alter bets on a pause in Federal Reserve rate cuts while JPMorgan Chase & Co. led a slide in banks after its results. Bonds wavered. The dollar rose.

Signs that price pressures are gradually abating gave a degree of comfort to investors in the immediate aftermath of the data, but the moves across asset classes waned as the session progressed. The S&P 500 was little changed. JPMorgan sank 3% as investment-banking fees missed its own guidance, with revenue from both underwriting and advising on mergers dropping.

Not even a slower-than-expected increase in the core consumer price index was able to sustain the advance in Treasuries that followed the data. After three Fed cuts since September, money markets continued to project the next one only in mid-2026 and roughly no chance of a reduction at the end of this month.

“Today’s softer-than-expected core CPI print is unlikely to alter the Fed’s calculus for the January meeting,” said Seema Shah at Principal Asset Management. “With unemployment still low, growth running above trend, fiscal stimulus providing an offset, and inflation remaining above target, the Fed can comfortably keep rates on hold this month and likely over the next few meetings.”

December’s in-line CPI report may not be enough to move the Fed’s view toward more aggressive rate-cutting, but as a cooling jobs environment persists, inflation may not be as much of a constraint when it comes to interest rate policy, according to Bret Kenwell at eToro.

“However, the report should do little to rock the boat for equity investors, who are likely to turn their attention to the start of earnings season,” he said.

Following JPMorgan’s results Tuesday, earnings from megabank rivals Bank of America Corp., Wells Fargo & Co, Citigroup Inc., Goldman Sachs Group Inc. and Morgan Stanley are slated for Wednesday and Thursday. The group is expected to post its second-highest annual profit ever, boosted by President Donald Trump’s policy changes.

Traders also are mindful of the potential for a US Supreme Court ruling Wednesday on tariffs the White House has been enforcing this year, which have lessened the borrowing need marginally. An adverse ruling could draw a negative market reaction, even as the administration has alternative legal avenues for most of the levies.

The S&P 500 hovered near 6,975. The yield on 10-year Treasuries was little changed at 4.17%. The dollar rose 0.2%. Oil climbed after Trump amped up rhetoric over Iran.

The December core CPI, excluding the often volatile food and energy categories, increased 0.2% from November. On an annual basis, it advanced 2.6%, matching a four-year low.

The reading is perhaps a more convincing sign that inflation is on a downward path, since a number of caveats in November’s report contributed to a significant pullback in the annual core CPI.

“Given the quirks of November’s dual-month report, it’s surprising not to see more numerous large month-over-month readjustments,” said Stephen Kates at Bankrate. “Consumers can breathe a sigh of relief that we didn’t snap back to the 3% annual inflation rate. Although today’s reading doesn’t demonstrate additional progress for inflation, it doesn’t take a step backwards either.”

While this is good news for investors worried about inflation reaccelerating in December, the latest data probably won’t have much influence on Fed policy given the coming change in leadership, noted David Russell at TradeStation.

“We’ve seen this movie before — inflation isn’t reheating, but it remains above target,” said Ellen Zentner at Morgan Stanley Wealth Management. “There’s still only modest pass-through from tariffs, but housing affordability isn’t thawing. Today’s inflation report doesn’t give the Fed what it needs to cut interest rates later this month.”

Nothing in today’s report suggests the Fed needs to act immediately on interest rates, according to Jason Pride at Glenmede. He says policymakers are likely to remain on hold later this month, giving them time to digest incoming data and allow shutdown-related distortions to fade.

Looking ahead to 2026, one or two rate cuts remain a reasonable base case, contingent on how the balance between labor market conditions and inflation evolves, he added.

While we’re still unlikely to get another cut from the Fed in the first quarter thanks to more solid jobs data, the lower inflation print will allow the central bank to continue focusing on labor-market risks, noted Sonu Varghese at Carson Group.

“We expect the Fed to pause this month and possibly in March,” said Jeff Roach at LPL Financial. “However, by the time the Committee convenes in April and June, conditions will likely warrant another cut in rates. For now, the balance of risks tilt toward the weakening labor market. Hence, investors should brace for weaker payrolls and rising unemployment.”

More Comments on CPI:

Alexandra Wilson-Elizondo at Goldman Sachs Asset Management: Ultimately, the data reinforces the Goldilocks environment. That said, inflation prints are likely to shift from being a primary market trigger to more of a background constraint as the market becomes increasingly focused on the risks to Federal Reserve independence. We continue to like being long risk, avoiding the news treadmill and positioning instead for durable, tradeable themes.

John Kerschner at Janus Henderson Investors: While interest rates initially rallied on this news, they have since sold off and remain almost unchanged across the yield curve. We believe the market understands that now a January cut is off the table and is waiting for other economic data before drawing any major conclusions. For example, January inflation data often come in hot due to the year-end turn in the calendar.

Bottom line, the bond market this morning is saying nothing really surprising to see here. Let’s hold our horses, be patient and wait to see what other non-polluted data say before we change our overall forecasts.

Jim Baird at Plante Moran Financial Advisors: The December inflation report didn’t deliver a goldilocks reading, but it wasn’t bad – certainly “good enough” for investors and likely sufficient for Fed policymakers looking for affirmation that their rate-cut pivot wasn’t ill-timed, perhaps helping to clear the path for further easing in the months ahead.

Steve Wyett at BOK Financial: This is not enough, in our view, to see the Fed act in January but it keeps the downward trend intact which should allow for somewhat lower rates over the course of the year.

Skyler Weinand at Regan Capital: Tuesday’s CPI was in-line with expectations and that will likely keep the Federal Reserve on pause when it comes to interest rates for the foreseeable future. After cutting rates three times in the fall of 2025, the Fed is likely to take its time and absorb more data, especially given the noise we’ve seen in the recent data as a result of the government shutdown. Recent positive employment data, elevated inflation, sticky price levels and political noise will keep the Fed at bay through at least the Spring.

Angelo Kourkafas at Edward Jones: While this likely won’t lead to a January Fed cut, if price pressures remain subdued in the coming months as data noise clears, it could open the door for another rate cut in the spring. With CPI out of the way, investors will now turn their attention to corporate earnings for signals on where markets may head next.

Neil Birrell at Premier Miton Investors: After a surprisingly low US inflation number for November, December’s came in as expected with few surprises in the detail, so there are likely to be limited ramifications from this print. However, with all the noise around foreign policy, tariff impacts, looming mid-terms, the situation with Jerome Powell and mixed employment data, there is plenty to ponder on how the US economy is going to shape up over the coming months. Although the current fundamentals do look robust, it’s everything else we need to worry about.

Chris Low at FHN Financial: While this report is not likely to change the expected wait-and-see stance of the FOMC at the next Fed meeting, the seeds of 2026 rate cuts are clearly evident in the extraordinary drop in supercore inflation in 2025.

Scott Helfstein at Global X: The Fed still has some room to move, especially given weaker job creation and downward revisions in the latest report, but they may choose to wait and see if the impact of tariffs is really transitory. Rates are still likely to come down, but the timing is getting a little more cloudy.

Jeff Schulze at ClearBridge Investments: While investors will cheer this release as further evidence of disinflationary progress, the Fed will remain in “wait and see” mode given the uncertainty until more distance came be put between the data and the shutdown. This release is positive for risk assets and increases the odds that the Fed will provide additional monetary policy support in 2026.

Corporate Highlights:

Meta Platforms Inc. is beginning to cut more than 1,000 jobs from the company’s Reality Labs division, part of a plan to redirect resources from virtual reality and metaverse products toward AI wearables and phone features. Meta Platforms and EssilorLuxottica SA are discussing potentially doubling production capacity for AI-powered smart glasses by the end of this year, in a bid to capture growing demand and head off rivals, according to people familiar with the matter. Apple Inc. announced a new subscription bundle of creative apps called Creator Studio, an attempt to give its photo- and video-editing software fresh momentum in the face of intensifying competition. Microsoft Corp. pledged to pay for the costs of building and using the electric-grid infrastructure required by its data centers, an attempt to head off customer anger that the energy-hungry facilities are driving up their power bills. Intel Corp. and Advanced Micro Devices Inc. rallied after KeyBanc Capital Markets upgraded the shares to overweight from sector weight, noting that the chipmakers have largely sold out their server CPU in 2026. Concern that Adobe Inc. will struggle in the artificial-intelligence era has driven Wall Street analysts’ view on the maker of software for creative professionals to its most pessimistic in more than a dozen years. U.S. Bancorp, the country’s largest regional bank, will acquire brokerage BTIG for as much as $1 billion as it looks to push deeper into investment banking and trading. Bank of New York Mellon Corp.’s profit beat analysts’ estimates, driven by gains in fee revenue and interest income. Boeing Co. sold more jets than Airbus SE in 2025, ending a seven-year losing streak as the US planemaker rallies from a period of tragedies and corporate crises. Delta Air Lines Inc. provided a profit forecast that fell short of Wall Street estimates, suggesting the major US airline is taking a more cautious view for 2026 after the aviation industry emerged from a volatile year. The US Department of Defense is set to invest in L3Harris Technologies Inc.’s missile unit with a $1 billion convertible preferred security, tightening the direct links between the US government and a major defense contractor. Orsted A/S shares surged after a US judge ruled work can resume on a wind farm off the coast of Rhode Island as the company challenges the government’s latest attempt to halt offshore projects. Volkswagen AG’s namesake brand is projecting rising electric-vehicle sales this year as the German automaker prepares a range of affordable plug-in models. Bayer AG’s pharmaceuticals unit is on track for a return to growth as new drugs for cancer and kidney disease offset sales lost to patent expirations. China Vanke Co. presented revised proposals to extend two local bonds that included collateral pledges as well as longer grace periods, according to people familiar with the matter, as the distressed developer struggles to stave off default. Some of the main moves in markets:

Stocks

The S&P 500 was little changed as of 11:58 a.m. New York time The Nasdaq 100 rose 0.3% The Dow Jones Industrial Average fell 0.6% The Stoxx Europe 600 was little changed The MSCI World Index was little changed Bloomberg Magnificent 7 Total Return Index rose 0.1% The Russell 2000 Index was little changed KBW Bank Index fell 0.8% JPMorgan fell 3.1% Currencies

The Bloomberg Dollar Spot Index rose 0.2% The euro fell 0.2% to $1.1645 The British pound fell 0.2% to $1.3433 The Japanese yen fell 0.6% to 159.09 per dollar Cryptocurrencies

Bitcoin rose 2.7% to $93,452.29 Ether rose 3% to $3,182.98 Bonds

The yield on 10-year Treasuries was little changed at 4.18% Germany’s 10-year yield was little changed at 2.85% Britain’s 10-year yield advanced three basis points to 4.40% The yield on 2-year Treasuries was little changed at 3.53% The yield on 30-year Treasuries was little changed at 4.83% Commodities

West Texas Intermediate crude rose 3.1% to $61.37 a barrel Spot gold rose 0.3% to $4,613.52 an ounce ©2026 Bloomberg L.P.