Markets rebounded sharply from yesterday’s sell-off on Friday as the latest consumer sentiment and inflation data strengthened expectations that the Federal Reserve will begin cutting interest rates in September, while big banks kicked off earnings season with mixed results.
The day kicked off with some economic news stoking optimism about the Fed’s dovish stance. On the inflation front: U.S. Bureau of Labor Statistics The ministry said the producer price index (PPI), which measures wholesale price inflation, rose 0.2 percent in June, slightly above economists’ expectations of a 0.1 percent increase.
Core PPI — an important measure for the Fed that excludes food, energy and trade costs — was unchanged from the previous month.
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Meanwhile, the University of Michigan Consumer Research Both short-term and long-term inflation expectations fell, though they were at their lowest in a year.
“The stock market continues to reach record highs amid expectations of strong earnings, easing inflation, hopes of Fed rate cuts and confidence that the economy could withstand the high interest rates of the past few years,” wrote Clark Belin, the firm’s president and chief investment officer. Bellwether Wealth.
Friday’s strong PPI reading comes after yesterday’s weak June CPI reading, but Belin noted the Fed is still data-dependent and has plenty of data to consider ahead. But, “even with Friday’s strong PPI reading, we still think a September rate cut is possible,” he added.
Markets are eager for the Federal Open Market Committee (FOMC) to cut interest rates, which are at a 23-year high. The committee was scheduled to cut the short-term federal funds rate by a quarter of a percentage point when it meets in June, but markets are becoming increasingly confident that it will be forced to ease sooner or later.
According to a CME Group survey, as of July 12, interest rate traders estimated the probability of the FOMC issuing an initial quarter-point rate cut at its September meeting to be 88%, up from 85% the previous day and 60% a month ago. FedWatchTools.
As the closing bell rang, tech companies Nasdaq Composite Index It rose 0.6% to 18,398, S&P 500 It rose 0.6% to 5,615. Dow Jones Industrial Average It rose 0.6% to finish at 40,000.
Big banks’ profits vary widely
The nation’s largest banks by assets have informally kicked off their second-quarter earnings season with widely differing results.
JPMorgan Chase (JPM, -1.2%) fell on Friday, Second Quarter Profit This exceeded analyst expectations.
For the quarter ended June 30, JPMorgan’s revenue increased 20.3% year over year to $51 billion, and net income increased 25% year over year to $18.1 billion. Excluding certain items, net income was $13.1 billion, or $4.40 per share.
“We delivered strong second quarter results with net income, excluding net gains on Visa shares, contributions to our fund and discretionary securities losses, of $13.1 billion and a ROTCE of 20 percent,” JPMorgan Chief Executive Officer James Dimon said in a statement.
Citigroup (C, -1.8%) Stock prices also fell, Exceeding sales and profit expectations Second quarter results.
For the quarter ended June 30, Citigroup’s revenue rose 3.6% from a year ago to $20.1 billion, which the company said was driven by growth across all its businesses, particularly in banking, U.S. consumer banking and markets. Earnings per share (EPS) rose 14.3% from a year ago to $1.52.
Citigroup Inc. reiterated a 6% increase in its third-quarter dividend, which it first announced on June 28 after the Federal Reserve’s stress tests.
Woe to the WFC
But the biggest drop in the S&P 500 index on Friday was Wells Fargo (WFC, -6%).
of Big banks beat analysts’ expectations Second-quarter sales and profits were strong, but net interest income, a key measure for banks, fell short of expectations.
For the quarter ended June 30, Wells Fargo’s revenue increased 0.8% from a year ago to $20.7 billion, even as net interest income fell 9.4% to $11.9 billion. Earnings per share (EPS) increased 6.4% from a year ago to $1.33.
“Our efforts to transform Wells Fargo were reflected in our second quarter results, with diluted earnings per common share increasing compared to the first quarter and the same period last year,” Wells Fargo CEO Charlie Scharf said in a press release.
WFC has generated a total return (share price change and dividends) of 24% year to date through July 11, compared with 30% for Citigroup and 24% for JPMorgan. Analysts have a consensus recommendation of “buy” for WFC, but express mixed conviction. S&P Global Market Intelligence.
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