U.S. Stock Indexes Rally Toward Records as Mixed Signals on Banks’ Profits and Inflation Keep Traders on Their Toes
NEW YORK (AP) — The U.S. stock indexes are on a winning streak, rallying toward record highs as they close out another positive week. The S&P 500 was up 1.2% in afternoon trading, poised to surpass its all-time high set just two days ago. The Dow Jones Industrial Average also saw gains, up 449 points, or 1.1%, while the Nasdaq composite surged 1.4%. Both the Dow and Nasdaq are on track to hit record highs.
The market was boosted by Bank of New York Mellon, which climbed 5.6% after reporting better-than-expected profits for the spring. Big Tech stocks like Nvidia also contributed to the market’s rise, bouncing back from a rare slide the day before.
However, not all banks saw positive results. Wells Fargo’s stock dropped 5.8% despite reporting stronger profits than analysts had predicted. The bank’s net interest income fell from a year ago, causing concern among investors.
In the bond market, Treasury yields fluctuated after the latest update on inflation showed prices rising more than expected at the wholesale level. This news followed a report that consumer-level inflation was better than anticipated. Despite initial swings, Treasury yields remained lower than the previous day.
Chris Larkin, managing director of trading and investing at E-Trade from Morgan Stanley, noted that it will take time to determine whether the recent inflation data is an aberration. Some analysts believe the acceleration in inflation could be due to higher profit margins for businesses, which may not be relevant to the Federal Reserve’s inflation fighters.
A report indicating that U.S. households are less fearful of high inflation in the future helped keep Treasury yields in check. Consumers are forecasting inflation of 2.9% over the next year, easing concerns about a self-fulfilling cycle of high inflation.
Traders are betting on a 94% probability that the Federal Reserve will begin cutting its main interest rate in September, as inflation appears to be slowing. Lower interest rates would benefit businesses, especially smaller companies that rely on borrowing to grow. The Russell 2000, which represents smaller stocks, surged 1.3% and is on track for its best week since November.
Despite the optimism in the market, JPMorgan Chase CEO Jamie Dimon warned that inflation and interest rates may remain higher than expected due to the U.S. government’s growing debt. In global markets, Japan’s Nikkei 225 fell 2.4% after a record-breaking run, while indexes in Asia and Europe showed mixed results.
Overall, traders are cautiously optimistic as they navigate the mixed signals on banks’ profits and inflation, keeping a close eye on the Federal Reserve’s next moves.
