The Dow and S&P 500 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 cut by the Federal Reserve in November.
In afternoon trading, the Dow Jones Industrial Average climbed 317 points, or 0.8%, to 42,771. The blue-chip touched an intraday record high of 42,835.48, outperforming its peers as major bank stocks boosted the index.
The S&P 500 gained 0.5%, and the Nasdaq was up 0.3%. All three major indexes were on track to notch their fifth consecutive week of gains.
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.
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 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 from 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.
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.
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.