The Dow touched a record high on Friday as this year’s lagging stocks gained favor on optimism that the Federal Reserve will begin easing monetary policy in September, while big lenders fell after reporting mixed results.
The Dow Jones Industrial Average jumped more than 400 points to an intraday high of 40,257.24, surpassing its previous intraday all-time high of 40,077.40 points hit in late May. But the blue-chip index pared gains, closing at 40,000.90, just shy of its record close of 40,003.59 on May 17
The S&P 500 and the Nasdaq both advanced 0.9%. All three indexes rose for the week.
JPMorgan Chase’s second-quarter profit increased on a boost from rising investment banking fees. However, shares of the world’s largest bank dipped 1.2% after a 21.4% climb this year.
Wells Fargo slid 6% as the lender missed estimates for quarterly interest income, while Citigroup fell 1.8% even after it posted a surge in investment banking revenue.
“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.
“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.
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.
In a mixed session for megacap stocks, Apple rose 1.3%, while Meta Platforms shed 2.8%.
Tesla jumped 3% after a more than 8% slide on Thursday, following a report of its robotaxi launch delay.
