S&P 500, Dow hit records, boosted by bank earnings

The S&P 500 and the Dow scored record closing highs on Friday, with the biggest boosts from financial stocks after banks reported strong quarterly results while the latest inflation data supported expectations for a US Federal Reserve rate cut in November.

Major financial companies kicked off earnings season with JPMorgan Chase rallying after the lender reported higher-than-expected third-quarter profit and raised its annual interest income forecast.

Shares in Wells Fargo rose after its profit also beat analysts’ expectations. BlackRock stock gained ground after the asset manager reported that its assets under management had hit a record high for the third straight quarter.

Other stocks in the industry rose broadly, making the S&P 500 Financials index the biggest index points boost for the benchmark.

“We’d some good earnings reports from some leading financial companies. That’s a good start to earnings season,” said Evan Brown, Portfolio Manager and Head of Multi-Asset Strategy, UBS Asset Management, adding that it bodes well for the economy.

“When financials do well, this is what a soft landing looks like. It’s a positive overall sign for the economy and sets a positive tone for earnings releases in other industries in the next few weeks.”

Also on Friday, 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 per cent rise expected by economists polled by Reuters.

According to preliminary data, the S&P 500 gained 34.71 points, or 0.60 per cent, to end at 5,814.76 points, while the Nasdaq Composite gained 59.71 points, or 0.33 per cent, to 18,341.76. The Dow Jones Industrial Average rose 409.84 points, or 0.97 per cent, to 42,863.96.

The data follows Thursday’s Consumer Price Index reading, which was slightly higher than forecast, although weekly jobless claims rose more than expected.

“The market’s pretty convinced that we’re going to have a soft landing and that inflation, even with CPI being a little bit higher than expected yesterday, is going to be moderate,” said Scott Wren, senior global market strategist at Wells Fargo Investment Institute in St. Louis, Missouri.

“Inflation is moderating. If you look at today’s PPI data, the core and final demand were both a little lower than expected … Inflation’s certainly been moderating and that’s a positive that the market paid attention to.”

Meanwhile, a preliminary reading of the University of Michigan’s October consumer sentiment index stood at 68.9, compared with analysts’ estimate of 70.8.

With the week’s data under their belts, traders kept bets steady for a roughly 90 per cent probability the Fed would cut rates by 25 basis points at its November meeting, and a 10 per cent chance it will leave rates unchanged, according to CME’s FedWatch tool.

During the session the consumer discretionary index was under pressure from a slump in shares of Tesla 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.