S&P 500, Dow hit record highs, boosted by bank earnings surprise

By Sinéad Carew and Lisa Pauline Mattackal

(Reuters) -The S&P 500 and the Dow hit record 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 U.S. Federal Reserve rate cut in November.

Major financial companies kicked off the earnings season with JPMorgan Chase (NYSE:JPM ) rising 5% after the lender reported higher-than-expected third-quarter profit and raised its annual interest income forecast.

Wells Fargo rose 6%, after its profit also beat analysts' expectations. BlackRock (NYSE:BLK ) gained 3% 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, with the S&P 500 Financials index climbing 2% to a record high, the S&P 500 Banks index rising 4.6% to its highest level since February 2022, and the KBW regional bank index up almost 3%.

"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 U.S. 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.

"When you look at the components of PPI that go into the core PCE print, including healthcare and financial services, they looked benign on balance, suggesting that inflation is not running away from us," said Brown.

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

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% probability the Fed would cut rates by 25 basis points at its November meeting, and a 10% chance it will leave rates unchanged, according to CME's FedWatch tool.

All three of Wall Street's major indexes were on track to notch their fifth consecutive week of gains.

At 02:28 p.m. on Friday, the Dow Jones Industrial Average rose 380.89 points, or 0.90%, to 42,834.83, the S&P 500 gained 35.06 points, or 0.61%, to 5,815.11 and the Nasdaq Composite gained 68.08 points, or 0.37%, to 18,350.13.



Among the S&P 500's 11 major industry indexes the only decliner was consumer discretionary.

The consumer index was under pressure from a 8% slump in Tesla (NASDAQ:TSLA ), which also 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.

Source: Investing.com