*

US consumer prices rise slightly above expectations in Dec

*

JPMorgan ( JPM ), Wells Fargo ( WFC ), Goldman Sachs ( GS ) post higher Q4

profits

*

Israel, Hamas reach peace deal to end Gaza war, official

says

*

Indexes up: Dow 1.65%, S&P 500 1.79%, Nasdaq 2.37%

(Updates to afternoon US trading)

By Chuck Mikolajczak

NEW YORK, Jan 15 (Reuters) -

U.S. stocks surged on Wednesday, with all three major

indexes on track for their biggest daily percentage gains in

more than two months, as lower-than-expected December core

inflation data and solid earnings from major U.S. banks fueled a

rally.

The Labor Department said the consumer price index (CPI)

increased the most in nine months as energy costs rose, although

a measure of underlying inflation pressures subsided.

Data on Tuesday showed the producer price index (PPI)

rose less

than expected.

"We've gotten so puckered over the fact that rates might

be going up and this is going to be a problem and the UK won't

be able to borrow money and oh, our deficit, and so everyone was

kind of wound up," said Stephen Massocca, senior vice president

at Wedbush Securities in San Francisco.

"The CPI number and the PPI number - they're not super

cool, but they're certainly not hot - and certainly it leads one

to believe that the embers of inflation are dying."

The Dow Jones Industrial Average rose 703.31

points, or 1.65%, to 43,221.59, the S&P 500 advanced

104.70 points, or 1.79%, to 5,947.61 and the Nasdaq Composite

climbed 450.61 points, or 2.37%, to 19,495.00.

All three major indexes were on track for their biggest

daily percentage gain since Nov. 6 as was the domestically

focused Russell 2000 index of small-cap stocks, which

jumped 1.82%.

Stocks have struggled recently following a post-U.S.

election rally, with the S&P 500 falling in four of the previous

five weeks. A resilient economy, nagging inflation and comments

from Federal Reserve policymakers have fanned worries about the

central bank being less aggressive in cutting interest rates

than previously anticipated.

Concerns linger about potential tariffs from

President-elect Donald Trump's incoming administration that

would further stoke inflation.

But expectations for

more Fed rate cuts

this year increased following the CPI data, along with odds

for a cut of at least 25 basis points at the June Fed meeting.

Fed officials said on Wednesday the recent inflation

data

was helpful

but

noted uncertainty

in the coming months as they await policies from the

incoming Trump administration.

The Fed's Beige Book showed economic activity

increased slightly

to moderately in late November and December, with

employment ticking up and prices rising moderately amid concerns

about the potential impact of policies.

The benchmark Treasury note yield tumbled

from a 14-month high of 4.809% hit earlier this week and was

last down 13.7 bps at 4.651%.

Also providing support were earnings from large banks,

with JPMorgan ( JPM ) up 1.94% after it reported a

record annual profit from rebounding markets in the fourth

quarter. Wells Fargo ( WFC ) jumped 6.76% after its

fourth-quarter profit beat Street expectations as a surge in

dealmaking activity boosted its investment banking business.

Goldman Sachs ( GS ) advanced nearly 6% as the top boost to the

Dow Industrials following its

best quarterly profit

since the third quarter of 2021 and Citigroup ( C/PN ) shot up 6.84%

after it

swung to a profit in the fourth quarter.

Relief came from a long-awaited

ceasefire deal between Israel and Hamas

paved the way to potentially ending the 15-month-long Gaza

war that has upended the Middle East.

Advancing issues outnumbered decliners by a 6.46-to-1

ratio on the NYSE, and by a 3.17-to-1 ratio on the Nasdaq.

The S&P 500 posted 20 new 52-week highs and nine new

lows, while the Nasdaq Composite recorded 55 new highs and 79

new lows.