S&P 500, Dow Surge to Record Highs Amid Unexpected Bank Earnings Triumph

Leading financial firms have initiated the earnings season with JPMorgan Chase JPM.N seeing a surge after the bank announced third-quarter earnings that surpassed expectations and increased its forecast for annual interest income.

Wells Fargo WFC.N shares climbed following reports that its profits exceeded what analysts had predicted. Similarly, BlackRock BLK.N shares advanced as the asset management company reported that its managed assets reached new record levels for the third consecutive quarter.

Across the board, stocks in the financial sector saw an uptick, contributing significantly to the S&P 500 Financials index .SPSY, which became the top performer in terms of points added to the benchmark.

“We’ve seen some impressive earnings reports from key financial institutions. It’s an encouraging start to the earnings season,” noted Evan Brown, Portfolio Manager and Head of Multi-Asset Strategy at UBS Asset Management. He added that this positive trend is a good omen for the overall economy.

“This performance by financial stocks is indicative of what a soft landing in the economy might look like. It’s a generally positive signal for the economy and lays a hopeful groundwork for upcoming earnings announcements from other sectors in the near future.”

According to preliminary figures, the S&P 500 .SPX increased by 34.71 points, or 0.60%, closing at 5,814.76, while the Nasdaq Composite .IXIC went up by 59.71 points, or 0.33%, finishing at 18,341.76. The Dow Jones Industrial Average .DJI rose by 409.84 points, or 0.97%, to end at 42,863.96.

This data comes on the heels of the Consumer Price Index reading from Thursday, which was slightly above expectations, though there was a higher-than-anticipated rise in weekly jobless claims.

“The market is fairly optimistic about achieving a soft landing, believing that inflation will remain moderate, even though the CPI was slightly higher than anticipated yesterday,” explained Scott Wren, Senior Global Market Strategist at Wells Fargo Investment Institute in St. Louis, Missouri.

“Inflation appears to be easing. Today’s PPI data showed that both the core and final demand indices were a bit lower than expected… There’s a clear trend of moderating inflation, which the market has taken into account,” he continued.

Also, the University of Michigan’s preliminary October consumer sentiment index was reported at 68.9, which is below the expected 70.8.

With this week’s data, traders are maintaining their expectations for a roughly 90% chance that the Fed will reduce rates by 25 basis points at its November meeting, with a 10% probability of rates remaining unchanged, as per the CME’s FedWatch tool.

Additionally, the consumer discretionary index .SPLRCD felt pressure due to a decline in Tesla TSLA.O shares after the electric vehicle manufacturer unveiled its much-anticipated robotaxi. However, details regarding production scale-up or potential regulatory challenges were not provided.

Q3 earnings seen positive for most S&P 500 sectors: https://reut.rs/3Bv5SNg

Monthly change in US Producer Price Index: https://reut.rs/4h1LO59