NEW YORK: The S&P 500 and the Dow hit record highs on Friday, driven by gains in major banks following third-quarter results, while the latest producer price data backed expectations for a 25-basis-point rate reduction by the US Federal Reserve in November.
Major financial companies kicked off the earnings season on the day, with JPMorgan Chase rising 5% after the lender reported higher-than-expected third-quarter profit and raised its annual interest income forecast.
Wells Fargo rose 5.7%, after its profit also beat analysts’ expectations. BlackRock gained 3.1% after the asset manager reported its assets under management had hit a record high for the third straight quarter.
Other financial stocks rose broadly, with the Financials index climbing 1.9% to a record high, the S&P 500 Banks index rising 4.5% to its highest since February 2022, and an index of regional lenders up 3%.
However, a 7.8% slump in Tesla limited gains on the Nasdaq after the EV maker unveiled its long awaited robotaxi, but did not provide details on how fast it could ramp up production or deal with potential regulatory hurdles. Meanwhile, data from the US Department of Labor showed the Producer Price Index for final demand was unchanged on a monthly basis in September, compared to the 0.1% rise expected by economists polled by Reuters.
Traders kept bets steady on a 25-basis-point rate cut by the central bank in November, pricing in a nearly 88% chance, according to CME’s FedWatch.
The data comes after Thursday’s Consumer Price Index data, which was slightly higher than forecast, although weekly jobless claims rose more than expected.
“(The Fed) is trying to thread the needle between not creating inflation through accommodative policy, but not letting the labor markets fall apart. The conflicting data over the last week shows that challenge,” said Matt Rowe, head of portfolio management and cross asset strategies at Nomura Capital Management.
The Dow Jones Industrial Average rose 344.19 points, or 0.81%, to 42,798.31, the S&P 500 gained 34.85 points, or 0.61%, to 5,815.15, and the Nasdaq Composite gained 66.54 points, or 0.37%, to 18,349.13.
All three major indexes were on track to notch their fifth consecutive week of gains.
With major indexes trading around record highs and the benchmark S&P 500 up more than 21% year-to-date, the third-quarter results will test if 2024’s rally can be sustained.
“The success of banks this quarter won’t be universal. With valuations where they are... I would say outperformance is already priced in to some degree,” Rowe said.
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