Wall Street’s main indexes experienced gains on Friday, driven by a softer-than-expected inflation report that raised optimism for potential early interest-rate cuts. Investors also navigated through a variety of earnings reports from major lenders, contributing to a mixed sentiment in the financial markets.
The S&P 500 achieved a consecutive record closing high, surpassing the previous day’s mark of 4,796.56. Currently, it stands less than 1% away from its all-time high of 4,818.62 points. Notably, all three major indexes are set for weekly gains.
Friday’s data revealed a surprise decline in U.S. producer prices for December, attributed to a drop in the cost of goods, while prices for services remained unchanged. This unexpected development was met with positivity, with Robert Pavlik, senior portfolio manager at Dakota Wealth, stating, “It was a good report, alleviating some concerns about inflation.”
Following a hotter-than-expected consumer inflation print on Thursday, the latest data increased traders’ expectations for a 25-basis-point rate cut in March to nearly 78%, up from 66.3%, according to the CME Group’s FedWatch Tool.
In addition to the inflation dynamics, investors scrutinized earnings reports from major banks to gauge the health of corporate America. Bank of America (BAC.N) saw a 0.9% decline as its fourth-quarter profit contracted, impacted by $3.7 billion in one-off charges. Meanwhile, Wells Fargo (WFC.N) beat profit expectations through cost cuts, but concerns about a potential 7-9% lower net interest income in 2024 led to a 1.5% drop in its shares.
JPMorgan Chase (JPM.N) added 1.4% after reporting its best-ever annual profit and forecasting higher-than-expected interest income for 2024. Citigroup (C.N) gained 2.2%, despite a $1.8 billion fourth-quarter loss, as the lender signaled further reductions in its headcount.
The banking sector faced challenges in March 2023 but concluded the year with a 7% gain, fueled by hopes that the Federal Reserve might initiate interest rate cuts in 2024.
Limiting gains on the Dow, UnitedHealth (UNH.N) fell 3.2% due to higher-than-expected medical costs. However, the health insurer posted an upbeat fourth-quarter profit.
As of 9:49 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 48.50 points, or 0.13%, at 37,759.52, the S&P 500 (.SPX) was up 20.05 points, or 0.42%, at 4,800.29, and the Nasdaq Composite (.IXIC) was up 71.06 points, or 0.47%, at 15,041.24.
Delta Air Lines (DAL.N) faced a 6.8% decline after revising its annual profit outlook downward. Tesla (TSLA.O) also declined 1.3% following price reductions on some new China models and plans to suspend most car production at its Berlin factory.
Advancing issues outnumbered decliners significantly, with a ratio of 6.87-to-1 on the NYSE and 3.86-to-1 on the Nasdaq.
