NEW YORK: The Dow touched a record high on Friday as this year’s lagging stocks gained favor on optimism that the US Federal Reserve will begin easing monetary policy in September, while big lenders fell after reporting mixed results.
JPMorgan Chase’s second-quarter profit increased on a boost from rising investment banking fees. However, shares of the world’s largest bank dipped 0.1% after a 21.4% climb this year.
Wells Fargo slid 6.8% as the lender missed estimates for quarterly interest income, while Citigroup fell 1.7% even after it posted a surge in investment banking revenue.
The S&P 500 Financials index shed 0.5%, while the banks index lost 1%. “Bank earnings were a mixed bag to start off earnings season but buyers are still stepping in. That rotation into small- and mid-caps is still continuing and that’s a positive sign overall,” said Ryan Detrick, chief market strategist at Carson Group.
As the S&P 500 and the Nasdaq hover near record highs, investors are hoping for strong profit growth from companies beyond tech heavyweights such as Nvidia, so that the US stocks rally can broaden out.
Analysts expect second-quarter earnings for S&P 500 firms to grow by 9.6%, from a decline of 2.8% in the same period in 2023, according to LSEG IBES data.
The small-cap Russell 2000 rose 1.4% to hit a six-month high, while the S&P 400 Mid Cap index firmed 1.5%. The two indexes have lagged the S&P 500 this year.
“We think the rotation into the underloved, underappreciated, underperforming small- and mid-caps could take the baton in the second half of this year, as the Fed is clearly more dovish than they’ve been,” Detrick said.
At 11:53 a.m. ET, the Dow Jones Industrial Average was up 338.69 points, or 0.85%, at 40,092.44, the S&P 500 was up 51.08 points, or 0.91%, at 5,635.62, and the Nasdaq Composite was up 199.34 points, or 1.09%, at 18,482.75.
Data showed producer prices were slightly hotter-than-expected in June but that did little to change bets on the first rate cut in September. The report follows data showing a surprise fall in US consumer prices on Thursday.
Traders are now betting on a 94.4% chance of a rate cut by September, up from 77.7% a week ago, according to CME Group’s FedWatch.
All three major indexes were headed for weekly gains, with the Dow looking at its best week in nine.
In a mixed session for megacap stocks, Apple rose 1.9%, while Meta Platforms shed 1.3%.
Tesla jumped 3.5% after a more than 8% slide on Thursday, following a report of its robotaxi launch delay.
Advancing issues outnumbered decliners by a 4.24-to-1 ratio on the NYSE, and by a 2.84-to-1 ratio on the Nasdaq.
The S&P index recorded 54 new 52-week highs, while the Nasdaq recorded 149 new highs and 24 new lows.
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