(Reuters) – The New York Stock Exchange ended higher on Friday as investors remained optimistic about a rate cut by the Federal Reserve in September and despite mixed results from major U.S. banks.
The Dow Jones index gained 247.15 points, or 0.62 percent, to 40,000.90 points, and the broader Standard & Poor’s 500 rose 0.55 percent to 5,615.35 points.
The Nasdaq Composite gained 0.63% or 115.04 points to 18,398.445.
Over the week, the Dow Jones advanced by 1.6%, the S&P 500 by 0.9% and the Nasdaq Composite by 0.2%.
US producer prices rose more than expected in June while May data was revised upwards, but that did little to change bets on a first rate cut in September after strong inflation figures the day before.
Markets are betting on a 94% chance of a rate cut by September, up from 78% a week ago, according to CME Group’s FedWatch tool.
The small-cap Russell 2000 index rallied for a third straight day and hit its highest level since 2022, while the S&P 400 Mid Cap also jumped. Both indices have lagged the S&P 500 this year.
“This rotation into small and mid caps continues and is a positive sign overall,” said Ryan Detrick, chief market strategist at Carson Group.
As stock indexes trade around record highs, investors are betting on strong earnings growth for companies outside Nvidia and other heavyweights that continue to benefit from the explosive growth of artificial intelligence (AI).
Analysts expect S&P 500 company profits to jump 9.6% in the second quarter, with strong growth in technology companies but anticipate declines in real estate, industrials and materials, according to LSEG IBES data.
“The thematic appeal of the AI story is still there,” said Zachary Hill, head of portfolio management at Horizon Investments in Charlotte, North Carolina.
“We just need to see a shift in earnings growth from the rest of the market, and that’s something we’ll be watching closely over the next couple of weeks.”
In terms of values, the major banks that opened the results season posted mixed results.
Wells Fargo fell 6.02% as the company spent more to retain deposits amid intense competition.
JPMorgan fell 1.21% after announcing it would increase its provisions for non-performing loans.
(Written by Kate Entringer)
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