US: Wall Street closes higher on bets for Fed rate cut

WALL Street closed higher on Friday (Jul 12), with the S&P 500 and Dow Jones Industrial Average hitting intraday record highs, on bets that the US Federal Reserve will cut interest rates in September, while big banks fell after reporting mixed results.

Some of the market’s most valuable companies bounced back after dipping in the previous session. Apple and Nvidia each climbed more than 1 per cent.

The S&P 500 and Dow surged to all-time highs before giving up much of those gains by the close.

JPMorgan Chase’s second-quarter profit was lifted by rising investment banking fees. However, shares of the world’s largest bank dipped 1.2 per cent.

Wells Fargo tumbled 6 per cent after the lender missed estimates for quarterly interest income, while Citigroup fell 1.8 per cent despite reporting a surge in investment banking revenue.

The S&P 500 banks index lost 1.5 per cent.

The small-cap Russell 2000 rallied for a third straight day, gaining 1.1 per cent and reaching its highest since 2022, while the S&P 400 Mid Cap index rose 0.9 per cent. The two indexes have lagged the S&P 500 this year.

“That rotation into small- and mid-caps is still continuing and that’s a positive sign overall,” said Ryan Detrick, chief market strategist at Carson Group.

The most traded stock in the S&P 500 was Tesla, with US$38 billion worth of shares exchanged during the session. The electric car maker jumped 3 per cent.

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The S&P 500 climbed 0.6 per cent to end the session at 5,615.35 points.

The Nasdaq gained 0.6 per cent at 18,398.45 points, while the Dow Jones Industrial Average rose 0.6 per cent to 40,000.90 points.

For the week, the S&P 500 rose 0.9 per cent, the Nasdaq added 0.2 per cent and the Dow rose 1.6 per cent.

With stock indexes trading around record highs, investors are betting on strong profit growth from companies beyond Nvidia and other heavyweights that have benefited from explosive growth in artificial intelligence computing.

Analysts expect second-quarter earnings for S&P 500 firms to jump 9.6 per cent, with strong growth from technology companies but declining earnings in real estate, industrials and materials, LSEG IBES data showed.

“The thematic appeal of the AI story is still very much there,” said Zachary Hill, head of portfolio management at Horizon Investments in Charlotte, North Carolina. “We just need to see an inflection in earnings growth coming from the rest of the market, and that’s something that we’re going to be watching for quite intently over the next couple weeks.”

Data showed producer prices were slightly hotter-than-expected in June but that did little to change bets on the first rate cut in September. The report follows data showing a surprise fall in US consumer prices on Thursday.

Traders are betting on a 94 per cent chance of a rate cut by September, up from 78 per cent a week ago, according to CME Group’s FedWatch.

Advancing issues outnumbered falling ones within the S&P 500 by a 4.1-to-one ratio.

The S&P 500 posted 62 new highs and no new lows; the Nasdaq recorded 170 new highs and 36 new lows.

Volume on US exchanges was relatively light, with 11.3 billion shares traded, compared to an average of 11.6 billion shares over the previous 20 sessions. REUTERS