Positive Reaction To Inflation Data, Bank Earnings Leads To Strength On Wall Street

(RTTNews) - Following the modest pullback seen in the previous session, stocks showed a strong move back to the upside during trading on Friday. The major averages more than offset yesterday's losses, with the Dow and the S&P 500 reaching new record closing highs.

The major averages pulled back off their best levels going into the close but remained firmly positive. The Dow jumped 409.74 points or 1.0 percent to 42,863.86, the S&P 500 climbed 34.96 points or 0.6 percent to 5,815.03 and the Nasdaq rose 60.89 points or 0.3 percent to 18,342.94.

For the week, the Dow surged by 1.2 percent, while the Nasdaq and the S&P 500 both shot up by 1.1 percent.

The strength on Wall Street partly reflected a positive reaction to a Labor Department report showing producer prices in the U.S. were unexpectedly unchanged in September.

The Labor Department said its producer price index for final demand came in flat in September after rising by 0.2 percent in August. Economists had expected producer prices to inch up by 0.1 percent.

The report also said the annual rate of growth by producer prices slowed to 1.8 percent in September from an upwardly revised 1.9 percent in August.

Economists had expected the annual rate of producer price growth to dip to 1.6 percent from the 1.7 percent originally reported for the previous month.

The data reinforced optimism the Federal Reserve will continue lowering interest rates in the coming months, although hopes for another 50 basis point cut next month have largely evaporated.

"After an upside surprise from the September CPI report, producer prices came in below expectations and provide support for a 25bps rate cut in November," said Matthew Martin, Senior U.S. Economist at Oxford Economics.

Traders also reacted positively to earnings news from big-name banks, with shares of Wells Fargo (WFC) surging by 5.6 percent after the company reported better than expected third quarter earnings.

JPMorgan Chase (JPM) also jumped by 4.4 percent after reporting third quarter results that exceeded analyst estimates on both the top and bottom lines.

Meanwhile, a steep drop by shares of Tesla (TSLA) limited the upside for the Nasdaq, with the electric vehicle maker plunging by 8.8 percent amid a negative reaction to its long-awaited robotaxi event.

Sector News

Banking stocks saw substantial strength on the upbeat earnings news from Wells Fargo and JPMorgan, driving the KBW Bank Index up by 3.0 percent to its best closing level in over two years.

Significant strength was also visible among transportation stocks, as reflected by the 2.1 percent surge by the Dow Jones Transportation Average.

Brokerage stocks also showed a strong move to the upside on the day, with the NYSE Arca Broker/Dealer Index climbing by 1.7 percent.

Biotechnology, computer hardware and natural gas stocks also saw notable strength, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan's Nikkei 225 Index climbed by 0.6 percent, while China's Shanghai Composite Index tumbled by 2.6 percent.

Meanwhile, the major European markets all moved to the upside over the course of the session. While the German DAX Index advanced by 0.9 percent, the French CAC 40 Index climbed by 0.5 percent and the U.K.'s FTSE 100 Index edged up by 0.2 percent.

In the bond market, treasuries moved modestly higher after trending lower over the past several sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dipped 2.3 basis points to 4.073 percent.

Looking Ahead

Next week's U.S. economic calendar starts off relatively quiet but picks up later in the week the release of reports on retail sales and industrial production.

Earnings news is also likely to attract attention, with Bank of America (BAC), Citigroup (C), Goldman Sachs (GS), Johnson & Johnson, UnitedHealth (UNH), Morgan Stanley (MS) and Netflix (NFLX) among the companies due to report their quarterly results.