Wall Street’s major indices are rising as slightly better-than-expected producer price figures did little to dampen speculation about a rate cut by the US Federal Reserve in September. At the same time, investors also analyzed the mixed results of the major banks.
JPMorgan Chase’s profit rose in the second quarter on rising investment banking fees and an $8 billion (A$12 billion) book gain from a share swap deal with Visa. However, shares in the world’s largest bank fell 1.9 percent.
Wells Fargo shares fell 6.9 percent as the bank missed estimates for quarterly interest income. Citigroup shares fell 2.8 percent even though the bank reported an increase in investment banking revenues and profits in its services division.
The S&P 500 Financials Index lost 0.2 percent, while the banking index lost 2.2 percent, heading for the biggest single-day decline in nearly two months.
Previously, some of the largest U.S. banks were expected to report weaker profits in the second quarter due to lower interest payments and higher provisions for bad loans.
As the S&P 500 and Nasdaq hit new highs, investors are hoping for strong earnings growth from companies beyond technology heavyweights like Nvidia to help the rally in U.S. stocks extend. “Earnings from the big banks, big technology companies and consumer goods companies will be the most important to watch, as these companies are highly dependent on the strength of the economy,” said Clark Bellin, president and chief investment officer of Bellwether Wealth.
Analysts expect S&P 500 companies’ profits to rise 9.6 percent in the second quarter, according to LSEG IBES data, after a decline of 2.8 percent in the same period in 2023. Financial companies are expected to see profits rise 7.3 percent.
After data released on Thursday showed a surprise decline in US consumer prices, producer prices rose moderately in June, confirming the downward trend in inflation.
“The Fed has actually been more focused on the consumer price index (CPI) and PCE (percentage per capita) because even if producer prices rise, there is no guarantee that those price increases will be passed on to consumers,” said Brian Jacobsen, chief economist at Annex Wealth Management.
According to CME Group’s FedWatch, traders believe the probability of a rate cut in September is 96 percent, up from 77.7 percent a week ago.
In a mixed session for megacap stocks, Apple rose 1.5 percent, while Meta Platforms lost two percent.
In early trading on Friday, the Dow Jones Industrial Average rose 81.85 points, or 0.21 percent, to 39,835.60, the S&P 500 gained 25.29 points, or 0.45 percent, to 5,609.83 and the Nasdaq Composite rose 125.94 points, or 0.69 percent, to 18,409.35.
The S&P 500 and Nasdaq posted their worst trading days in more than two months on Thursday, as a shift away from high-flying large-cap stocks and toward small-cap stocks that have lagged this year also put the blue-chip Dow Jones on track for its best week in four years.
BNY rose 4.1 percent after the U.S. bank reported a 10 percent increase in second-quarter net profit.
On the NYSE, advancing stocks outnumbered declining stocks by a ratio of 3.68:1, and on the Nasdaq by a ratio of 3.30:1.
The S&P index recorded 33 new 52-week highs, while the Nasdaq recorded 105 new highs and 11 new lows.