Stock market today: Wall Street rolls to the edge of records as hopes remain for cuts to rates

AP Business Writer

NEW YORK (AP) — U.S. stocks rose Friday after some mixed signals on big banks’ profits and inflation did little to dent Wall Street’s belief that easier interest rates are on the way.

The S&P 500 climbed 0.6% to close its fifth winning week in the last six. The Dow Jones Industrial Average rose 247 points, or 0.6%, and Nasdaq composite added 0.6%. All three indexes had been on track to set all-time highs in afternoon trading but finished shy of them.

Bank of New York Mellon climbed 5.2% for one of the market’s bigger gains after it reported better profit for the spring than analysts expected. Nvidia and other highly influential Big Tech stocks also helped lift the market after a slide the prior day, which interrupted their rocket ride higher amid a frenzy around artificial-intelligence technology.

They helped offset a drop for Wells Fargo, which sank 6% even though the San Francisco-based bank reported stronger profit than analysts expected. It said a key underlying measure of profit fell from a year ago and that its net interest income could remain in the bottom half of the range it had forecast for the full year.

In the bond market, which has been home to some of Wall Street’s strongest action this week, Treasury yields yo-yoed after the release of the latest update on inflation. It said prices rose more at the wholesale level last month than economists expected, which was a letdown after data on Thursday said inflation at the consumer level was better than expected.

But after a couple initial swings, Treasury yields calmed and remained lower than they were late Thursday.

“It’s still going to take some time before we know whether yesterday’s number or today’s was the aberration,” said Chris Larkin, managing director of trading and investing at E-Trade from Morgan Stanley.

Some of the acceleration in Friday’s data could be the result of higher profit margins for businesses, which can swing sharply and some analysts called irrelevant to the inflation fighters at the Federal Reserve.

Also helping to keep yields anchored was a report suggesting U.S. households aren’t as fearful about inflation staying so high in the future. Over the coming year, U.S. consumers are forecasting inflation of 2.9%, according to preliminary data from the University of Michigan.

It’s the second straight month such expectations have eased. That helps calm worries about a potential spiral where expectations for high inflation could drive U.S. consumers toward behavior that would push inflation even higher. That in turn could give the Federal Reserve more of the evidence of slowing inflation that it says it needs to begin cutting its main interest rate, which is at its highest level in more than two decades.

After climbing as high as 4.23% following the wholesale inflation report’s release, the 10-year Treasury yield settled back down to 4.18% from 4.21% late Thursday. It’s down from 4.70% in April as hopes have risen that inflation is lowing enough momentum to convince the Fed to cut short-term rates.

Traders are banking on a 94% probability that the Federal Reserve will start easing rates in September, according to data from CME Group. Lower interest rates would release pressure that’s built up on the economy because of how expensive it’s become to borrow money to buy houses, cars, or anything on credit cards. Fed officials, though, have been saying they want to see “more good data” on inflation before making a move.

Easier interest rates would help all types of businesses, and smaller companies could see particularly big benefits because of their borrowings to grow. The smaller stocks in the Russell 2000 rose more than the S&P 500 index on Thursday, breaking a longstanding trend, and that continued on Friday.

The Russell 2000 rallied 1.1%, nearly double the S&P 500’s gain, and closed out its best week in eight months.

All told, the S&P 500 rose 30.81 points to 5,615.35. The Dow Jones Industrial Average gained 247.15 to 40,000.90, and the Nasdaq composite gained 115.04 to 18,398.45.

Of course, traders have a long history of being premature about forecasting cuts to rates. JPMorgan Chase CEO Jamie Dimon warned Friday that inflation and interest rates may stay higher than the market expects because of the U.S. government’s growing debt and other factors.

In stock markets abroad, Japan’s Nikkei 225 gave back some of its recent record-breaking run and fell 2.4%, though it’s still up more than 23% for the year so far.

Indexes were mixed across the rest of Asia and higher in much of Europe.

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AP Writers Matt Ott and Zimo Zhong contributed.