Stock market today: Asian shares advance after inflation data drives a rally on Wall Street

Asian shares mostly rose Thursday, following a rally on Wall Street driven by encouraging update on U.S. inflation.

Japan's benchmark Nikkei 225 added 0.2% to 38,532.18.

Bank of Japan data showed wholesale prices in Japan rose 3.8% in December last year compared to a year earlier, adding to pressures on the central bank to raise interest rates, possibly at a monetary policy meeting next week.

Shares in China were mixed. The Hang Seng in Hong Kong gained 0.4% to 19,368.04, while the Shanghai Composite index lost 0.2% to 3,220.52.

Australia's S&P/ASX 200 surged 1.3% to 8,322.50. South Korea's Kospi gained 1.2% to 2,526.28.

On Wall Street, strong profit reports from Wells Fargo and other big U.S. banks also helped launch indexes to their best day in two months.

The S&P 500 jumped 1.8% to 5,949.91. The Dow Jones Industrial Average rallied 1.7% to 43,221.55, and the Nasdaq composite leaped 2.5% to 19,511.23.

Bank stocks helped lead the way after several reported stronger profits for the last three months of 2024 than analysts expected.

Wells Fargo jumped 6.7%, Citigroup rallied 6.5% and Goldman Sachs gained 6%. They’re among the first big U.S. companies to report their results for the end of 2024, and even more focus may be on them than usual.

Treasury yields eased following an update on how much more U.S. households had to pay in December for eggs, gasoline, housing and other costs of living. The report said overall inflation accelerated to 2.9% from 2.7% in November.

The yield on the 10-year Treasury dropped back to 4.65% from 4.79% late Tuesday, which is a considerable move. It had largely been screaming higher since September, when it was below 3.65%. The two-year Treasury yield, which more closely tracks expectations for the Fed’s upcoming actions, fell to 4.26% from 4.37%.

While no one wants higher inflation, the numbers were more encouraging underneath the surface. After ignoring prices for food and energy, which can zigzag sharply from month to month, underlying inflation trends slowed to 3.2% in December. Economists had thought it would remain at 3.3% for a fourth straight month, according to FactSet.

The Federal Reserve pays more attention to that underlying number than the overall figure, and it’s particularly welcome following worries that improvements in inflation have halted and that it will be tough to get all the way down to the Fed’s 2% target.

Wall Street has been lurching down and up for weeks as traders tear up their forecasts for what the Fed will do with interest rates in 2025. A further easing would boost the U.S. economy and prices for investments, but it could also give inflation more fuel.

Few traders expect Wednesday’s data to convince the Fed to cut its main interest rate at its meeting later this month, as it’s done at three straight meetings since September. But economists and analysts say it could open the door for cuts later in the year, maybe even in March, if more data comes in to show that upward pressure on inflation is abating.

When Treasury yields are climbing and bonds are paying more in interest, that cranks up pressure on stock prices by luring investors away from stocks and into bonds. To make up for it, stock prices typically either have to fall or corporate profits have to rise more strongly.

In other dealings early Thursday, benchmark U.S. crude added 15 cents to $78.86 a barrel. Brent crude, the international standard, jumped was up 15 cents at $82.18 a barrel.

The U.S. dollar declined to 156.06 Japanese yen from 156.47 yen. The euro cost $1.0285, down from $1.0289.

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AP Business Writer Stan Choe contributed.