U.S. stock indexes are climbing toward records following some conflicting signals on big bank profits and inflation.
NEW YORK — U.S. stock indexes rose toward record highs on Friday, capping off a recent week of gains, following some mixed signs on big bank profits and inflation.
The S&P 500 was up 1.2% in afternoon trading, on track to surpass the all-time high it hit on Wednesday. The Dow Jones Industrial Average was up 449 points, or 1.1%, as of 2:06 p.m. Eastern time, and the Nasdaq Composite was up 1.4%. The Dow and Nasdaq are also on track to hit new all-time highs.
Bank of New York Mellon rose 5.6%, the market’s biggest gainer, after it reported spring profits that beat analysts’ expectations.Nvidia and several other highly influential big tech stocks also helped lift the market after a rare selloff the previous day halted a sharp rise amid enthusiasm over artificial intelligence technology.
Those investments helped offset losses at Wells Fargo, which fell 5.8% even as it reported profits that beat analysts’ expectations. The company said a key underlying measure of profits was down from a year ago and that net interest income for the full year was likely to be at the lower half of its expected range.
The bond market was the most active on Wall Street this week, with Treasury yields fluctuating sharply after the latest inflation report showed wholesale price growth last month surpassing economists’ expectations. That was a disappointment following Thursday’s report that consumer price inflation last month rose more than expected.
But after a few initial fluctuations, Treasury yields settled down and remained below Thursday’s closing levels.
“It’s going to take some time to know if yesterday’s numbers were an anomaly or if today’s numbers are an anomaly,” said Chris Larkin, managing director of trading and investing at Morgan Stanley E-Trade.
Part of the acceleration in Friday’s data could be the result of rising corporate profit margins, though profit margins can fluctuate sharply and some analysts noted they were unrelated to the Federal Reserve’s inflation measures.
Also helping to stabilize yields were reports that U.S. households are less fearful about inflation staying high: Preliminary data from the University of Michigan show that U.S. consumers expect inflation to be 2.9% over the next 12 months.
This marks the second straight month that those expectations have eased, which could spell big trouble for the Fed. The concern is that higher inflation expectations among U.S. consumers could spur behavior that pushes inflation even higher, creating a self-fulfilling cycle.
Following the release of the Wholesale Price Index report, the yield on the 10-year Treasury note rose to 4.23%, before slipping to 4.19% from Thursday’s close of 4.21%.
The yield on the two-year note, which tracks closely with expectations of Fed action, fell to 4.47% from Thursday’s close of 4.51%.
Traders are betting on a 94% chance that inflation will slow and the Federal Reserve will start cutting its key interest rate in September, according to data from CME Group. Wall Street is banking on a cut to the Fed’s key interest rate, which is at its highest level in more than two decades.
Lower rates would ease pressures that have built up in the economy from the higher costs of borrowing on credit cards to buy homes, cars and everything else. But Fed officials have said they want to see “better data” on inflation before taking any action.
Easing interest rates benefit all kinds of businesses, with small and medium-sized companies potentially benefiting greatly because they have more to borrow to fund growth. Smaller stocks in the Russell 2000 Index clearly outperformed larger stocks in the S&P 500 Index on Thursday, and that trend continued on Friday, following strong consumer-level inflation data.
The Russell 2000 rose 1.3% and is on track for its best week since November.
Of course, traders have a long history of predicting rate cuts too early. JPMorgan Chase & Co. Chief Executive Jamie Dimon warned on Friday that soaring U.S. government debt and other factors could keep inflation and interest rates higher than markets expect.
Among overseas stock markets, Japan’s Nikkei stock average retreated slightly from its recent record gains, falling 2.4%, but is still up more than 23% so far this year.
Index figures were mixed in other Asian countries, but rose in much of Europe.
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AP writers Matt Ott and Jimmo Zhong contributed.
