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Kelly Evans: Stocks surge on CPI and strong banks

Kelly Evans
Scott Mlyn | CNBC

Kelly Evans

Today is like a little taste of what the year could be like if everything goes just right. Inflation is cooler, bond yields have chilled out, bank earnings are coming in strong, and stocks are up 1.7%.  

It's the second day now that inflation reports have been better than expected. Yesterday, producer prices rose half as much as expected--just 0.2% on the month--and core prices were flat. Today, core consumer prices also rose just 0.2%, which was enough to send the 10-year Treasury yield tumbling to 4.65%.  

That drop in yields means immediate relief for mortgage rates, so the homebuilder stocks are all flying. And remember, KB Home shares had already surged 7.5% after their earnings on Monday--which was for a quarter with rates at near-cycle highs--which had helped give the sector a little lift.  

Speaking of earnings, some of the best stocks in the S&P today are the big banks which put up results this morning. Bank of New York is up 6.5%. BlackRock is up nearly 6%. Citi and Wells Fargo are up 5%.   

And lower rates are also giving a boost to the Nasdaq and to the Russell 2000 small-caps, which are extremely rate-sensitive. The Russells are leading the way today, with a 2.4% gain.  

Another glimpse of what could be in store this year is on the deal front. Quietly, there has been a steady stream of deal activity after radio silence for months--if not years--under outgoing FTC Chair Lina Khan. Just in the past few weeks, we've seen Getty merge with Shutterstock, Cintas trying to buy UniFirst, Constellation to buy Calpine, Eli Lilly acquiring Scorpion, and now QXO seeking to buy Beacon Roofing.  

That pace of deal news is a fillip for the investment banks. Shares of Piper Sandler, for instance, soared post-election on the anticipation this boomlet was coming, and are up 83% over the past year. Stifel and Goldman are up almost 60%.  

So either today's action is a preview of what's to come the rest of the year--or it's the last hurrah before tariffs take center stage.  

See you at 1 p.m! 

Kelly

Twitter: @KellyCNBC

Instagram: @realkellyevans

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