By Noel Randewich and Medha Singh
(Reuters) – Wall Street stock indexes rose on Friday on expectations the U.S. Federal Reserve will cut interest rates in September, while shares of big banks fell after they reported mixed earnings.
Some of the market’s most valuable companies bounced back after declining in the previous session, including gains in Apple (NASDAQ:) and Nvidia (NASDAQ:).
JPMorgan Chase (NYSE:) reported second-quarter profit rose due to a rise in investment banking fees. However, shares of the world’s largest bank fell.
Wells Fargo shares fell after the lender missed quarterly interest income estimates, while Citigroup shares also fell even after it reported a rise in investment banking revenue.
Small-caps rallied for a third straight day and hit their highest level since 2022, while the S&P 400 mid-cap index also rose. Both indexes have lagged this year.
“This shift toward small- and mid-cap stocks is still ongoing, and it’s an overall positive sign,” said Ryan Detrick, chief market strategist at Carson Group.
According to preliminary data, the S&P 500 rose 31.92 points, or 0.57%, to close at 5,616.46, while the Nasdaq Composite added 113.58 points, or 0.62%, to close at 18,396.98. The Dow Jones Industrial Average rose 260.02 points, or 0.65%, to close at 40,013.77.
With stock indexes trading at record highs, investors are betting on strong profit growth from Nvidia and other giants besides companies that have benefited from explosive growth in artificial intelligence computing.
Analysts expect second-quarter earnings of S&P 500 companies to rise 9.6%, with strong growth from technology companies but declines in real estate, industrial and materials earnings, LSEG IBES data shows.
“The thematic appeal of the AI story is still very high,” said Zachary Hill, head of portfolio management at Horizon Investments in Charlotte, North Carolina. “We just need to see a change in earnings growth coming from the rest of the market, and that’s something we’re going to be watching very carefully over the next couple of weeks.”
Data showed producer prices were slightly higher than expected in June, but did little to change bets on a first rate cut in September. The report comes after data on Thursday showed a surprise fall in US consumer prices.
Traders are betting on a 94% chance of an interest rate cut by September, up from 78% a week ago, according to FedWatch from CME Group (NASDAQ:).
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