U.S. stocks rose on some conflicting signals about big bank profits and inflation, but they did little to dent Wall Street’s confidence that interest rate easing is on the way.
NEW YORK — U.S. stocks rose on Friday as some conflicting signals on big bank profits and inflation did little to dent Wall Street’s view that interest rates will be cut.
The S&P 500 rose 0.6%, finishing with a gain for the fifth straight week in the past six. The Dow Jones Industrial Average rose 247 points, or 0.6%, and the Nasdaq Composite Index rose 0.6%. All three indexes were on track to hit new all-time highs in afternoon trading but finished below those levels.
Bank of New York Mellon Co. rose 5.2%, the market’s biggest gainer, after it reported spring profits that beat analysts’ expectations. Nvidia Inc. and other highly influential Big Tech stocks also helped lift the market from a day earlier’s losses that had halted a sharp rise amid enthusiasm over artificial intelligence technology.
Those investments helped offset losses at Wells Fargo, whose shares fell 6% even as the bank reported profits that beat analysts’ expectations. The company said a key underlying measure of profits was down year over year and that net interest income could be at the lower half of its expected range for the full year.
The bond market was Wall Street’s most active this week, with Treasury yields fluctuating sharply after the release of the latest inflation data, which showed wholesale prices rose faster than economists expected last month, but disappointed after data on Thursday showed consumer-level inflation rose faster 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.
That marks the second straight month that those expectations have eased, helping to ease concerns about a potential vicious cycle in which expectations of higher inflation spur U.S. consumers to take actions that will push inflation even higher. That, in turn, could provide more evidence of slowing inflation for the Federal Reserve, which says it needs to start cutting its key interest rate, which is at its highest in more than two decades.
Following the release of the wholesale price index report, the yield on the 10-year Treasury note rose to 4.23%, before settling at 4.18%, down from 4.21% late Thursday, down from 4.70% in April, as calming inflation momentum raised expectations that the Fed would cut short-term interest rates.
Traders see a 94% chance that the Federal Reserve will begin easing interest rates in September, according to data from CME Group. Lower rates would ease pressures that have built up in the economy from people getting more expensive to borrow on credit cards to buy homes, cars and everything else. But Fed officials have said they want to see “better data” on inflation before acting.
Easing interest rates would benefit all kinds of businesses, but smaller companies could be especially big beneficiaries of increased borrowing. Small-cap stocks in the Russell 2000 outperformed the S&P 500 on Thursday, breaking a longstanding trend and continuing that trend on Friday.
The Russell 2000 rose 1.1%, nearly double the gain of the S&P 500, finishing with its strongest week in eight months.
Overall, the S&P 500 rose 30.81 points to 5,615.35, the Dow Jones Industrial Average rose 247.15 points to 40,000.90 and the Nasdaq Composite added 115.04 points to 18,398.45.
Of course, traders have a long history of predicting rate cuts too early. JPMorgan Chase & Co. Chief Executive Jamie Dimon warned Friday that inflation and interest rates may remain higher than markets expect because of growing U.S. government debt and other factors.
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.
