Dow rises 171 points, S&P 500 closes shy of record high ahead of inflation report

The S&P 500 finishes 13 points below its all-time closing high of 4,796.56, set two years ago

U.S. stocks finished higher on Wednesday, a day ahead of a widely anticipated December inflation report, though the S&P 500 fell short of an all-time high after remarks from a key Federal Reserve policymaker.

How stock indexes traded

  • The S&P 500 SPX rose 26.95 points, or 0.57%, to 4,783.45. That’s 13 points shy of its record closing high of 4,796.56, reached in January 2022.
  • The Dow Jones Industrial Average DJIA climbed 170.57 points, or 0.45%, to 37,695.73. Wednesday’s closing level was the third-highest in the history of the index, according to Dow Jones Market Data.
  • The Nasdaq Composite COMP gained 111.94 points, or 0.75%, to reach 14,969.65. It was the fourth straight day of gains for the tech-heavy index.

On Tuesday, the Dow Jones fell 0.4% to 37,525.16, while the S&P 500 declined 0.2% to 4,756.50, and the Nasdaq Composite gained less than 0.1% to end at 14,857.71.

What drove markets

Inflation, along with its impact on bond markets and the Federal Reserve’s monetary-policy trajectory, is the primary issue at hand this week as investors await Thursday’s consumer-price index reading for December.

Also in focus is Friday’s high-profile corporate earnings reports — with major banks JPMorgan Chase & Co. JPM, -0.73%, Bank of America Corp. BAC, -1.06%, Citigroup Inc. C, +1.04%, and Wells Fargo & Co. WFC, -3.34% all reporting fourth-quarter results.

“The market is hopeful for continued progress on disinflation, but those are the optimists and that’s the soft-landing story,” said Nanette Abuhoff Jacobson, a Boston-based global investment strategist for Hartford Funds, which managed $123.2 billion in assets as of September.

The market’s shaky beginning to the new year — with all three major stock indexes little changed since Jan. 2 — “is reflecting concern that inflation won’t deliver to market expectations, which is for the Fed to cut five or six times this year,” she said via phone. “We would get five or six cuts if it looked like recession fears were reigniting, and so this idea that the Fed is going to deliver these five or six cuts in a perfectly benign environment is optimistic.”

Separately on Wednesday, New York Fed President John Williams, speaking during the final hour of trading, said interest rates will likely need to stay high “for some time” until policymakers are confident about inflation returning to 2%.

On Wednesday, the S&P 500 finished at its highest level since Jan. 4, 2022, after having rallied over the past few months. Contributing to its rise has been the hope that easing inflation will allow the central bank to lower interest rates sooner and faster than the markets previously anticipated.

The yield on the 10-year Treasury note BX:TMUBMUSD10Y, the benchmark for borrowing costs, has fallen from 5% in October to 4.029% on Wednesday.

For the market’s bullish narrative to persist, inflation must continue to fall back toward the Fed’s 2% target, emphasizing the importance of December’s CPI figures, which will be published at 8:30 a.m. Eastern time on Thursday.


Economists expect annual headline CPI inflation to inch up to 3.2% last month from 3.1% in November. The core reading, which strips out more volatile items like food and energy, is expected to fall to 3.8% year-over-year, from 4% previously.

Adam Phillips, the California-based director of portfolio strategy at EP Wealth Advisors, said the CPI report may give investors enough confidence that disinflation is likely to continue, even if price levels are “still a very long way from anything that is considered healthy.”

However, the economy has certain factors that are beyond the Fed’s control, such as volatility in supply chains, growing geopolitical risks and a potential resurgence in inflation, Phillips told MarketWatch via phone on Wednesday.

In U.S. economic data, wholesale inventories declined 0.2% in November, according to the Commerce Department.

Companies in focus