Traders work on the floor of the New York Stock Exchange during morning trading on January 11, 2024.
Angela Weiss | AFP | Getty Images
The S&P 500 and the Dow Jones Industrial Average rose to new highs on Friday as the giant banks heralded a promising start to their third-quarter earnings season.
The general index rose 0.6%. Dao He won 400 points or 0.9%. The Nasdaq Composite Index rose 0.3%. Tesla Shares fell 7% on the back of a disappointing robotaxi event. The tech-heavy index is less than 2% below its all-time high.
“What we're seeing — and I think you're seeing it hit hard today, in a good way — is market expansion,” said Craig Sterling, head of U.S. equity research at U.S. firm Amundi.
The major averages are headed for weekly gains, with the S&P 500 up 1.1% and on pace for a fifth straight week. The Dow Jones index achieved gains of 1.2%, along with the Nasdaq index.
A strong start to the third-quarter earnings season provided a boost to stocks. JPMorgan Chase It rose 5% after beating earnings and revenue expectations, while Wells Fargo Jumped nearly 6% on stronger-than-expected earnings. Investors shrugged off disappointing revenue and an 11% decline in net interest income.
“Net interest income was the indicator of whether a bank was doing well or not,” said Kim Forrest, chief investment officer at Bouquet Capital Partners. “Investors have realized that they will make money in good times and bad.”
Wall Street tends to view the banking sector as a barometer of the health of the economy, setting the pace for the remainder of earnings season. However, Forrest points out that they lack the visibility into future guidance that often influences post-earnings stock movements.
Beyond earnings, Wall Street weighed new data that helped ease concerns that inflation has not cooled fast enough. The Producer Price Index, a measure of wholesale inflation, remained unchanged in September and came in below the 0.1% increase expected by the Dow Jones. This helped ease some of the concerns raised by the September CPI, which rose slightly more than expected.
“In general, these numbers have become less influential as inflation moderates,” said David Russell, global head of market strategy at TradeStation. “The Fed could still be on track for a 25 basis point increase at the next two meetings.”
Trading in Fed funds futures indicates a roughly 86% probability that the Federal Reserve will cut interest rates by a quarter point in November, according to the CME FedWatch tool. Central bank policymakers will closely monitor additional data, which will shape their course on interest rates.
