U.S. stocks surge to fresh 15-month highs as S&P 500 heads for best week since March

What’s driving markets

Second-quarter earnings reporting season began as some of the largest U.S. banks, along with asset-management giant BlackRock Inc., reported on Friday.

JPMorgan Chase & Co.
JPM,
+1.10%,
Wells Fargo & Co.
WFC,
+0.45%
and Citigroup Inc.
C,
-1.22%
shares rose after the banks reported earnings and revenue that beat forecasts. Investors have been eager to hear what those financial giants have to say after a quarter marked by bank failures and interest-rate hikes by the Federal Reserve. Investors also cheered numbers from Dow component UnitedHealth Group Inc.
UNH,
+7.14%,
which emerged as the best-performer on the Dow as it roared higher.

Their gains helped push the Dow into the lead on Friday, an uncommon position for the blue-chip gauge, which has gained only 3.7% so far this year, compared to 17.5% for the S&P 500 and more than 35% for the Nasdaq Composite, FactSet data show.

The S&P 500 is on track to rise 2.9% this week, per FactSet. That would be its biggest weekly percentage-point gain since the week ended March 31.

Friday marks the close of what has been an eventful week for markets. The big story was the S&P 500 index’s first break above the key 4,500 level since April 2022.

The move was fueled by better-than-expected news on inflation, including Wednesday’s consumer-price index and Thursday’s producer-price index, which both showed the pace of price growth ebbing more quickly than economists had expected.

Strong earnings from Pepsi Co.
PEP,
-0.02%,
Delta Air Lines
DAL,
-1.14%
and now a handful of the biggest banks have added to the positive tone.

“We’ve had a week where most of our news flow and inputs have come in better than expected, whether you look at CPI, PPI or the first earnings from Delta and Pepsi,” said Art Hogan, chief market strategist at B.Riley Wealth, during a phone interview with MarketWatch.

“That’s continuing today with earnings from the big banks, which have either matched estimates or beat estimates.”

Taken together, earnings released so far this week showed that the U.S. consumer remains in strong shape, defying expectations that rising inflation and the spending of savings accumulated during the pandemic would diminish their buying power.

“The consumer may be not quite as strong but certainly the longer term prospects are better than expected,” said JJ Kinahan, chief executive of IG North America and president of the firm’s brokerage tastytrade.

“Many people thought we would see the consumer falter significantly due to stubborn inflation, but that’s not what’s happening at all.”

Friday’s economic data calendar was relatively light at the close of what has been a busy week. Investors digested a report on import prices, which showed that prices fell again in June, dropping 0.2%. Import prices have fallen every month of 2023 except for April — another sign that price pressures in the U.S. have abated.

Bond yields were slightly higher on Friday a day after falling for most of the week. The benchmark 10-year Treasury yield 
TMUBMUSD10Y,
3.808%,
 which started the week near 4.1%, moved to 3.79%, levels that haven’t been seen since late June.

The ICE U.S. Dollar Index 
DXY,
+0.12%,
 a gauge of the currency’s value against its main rivals, slipped further into territory it hasn’t seen in more than a year, trading at 99.77 Friday after the buck clinched its longest losing streak since 2021 on Thursday.

Investors were also paying close attention to remarks from Federal Reserve Board Gov. Christopher Waller, who said Thursday he was not swayed by June’s benign consumer inflation data, and that he wants the central bank to go ahead with two more 25-basis-point rate hikes this year.

Companies in focus

• JPMorgan Chase & Co.  stock rose on Friday after the largest U.S. bank’s second-quarter profit blew past analyst estimates.

• Wells Fargo & Co.  rallied toward a four-month high after the San Francisco-based bank beat second-quarter profit and revenue expectations, as higher interest rates and loan balances provided a boost to net interest income.

• UnitedHealth Group Inc. 
  UNH,
  +7.14%
  bounced off a 19-month low after the health care services and insurance company beat second-quarter earnings expectations and lifted its full-year outlook.

• Citigroup Inc. climbed after the money center bank reported second-quarter results that fell but beat expectations, as weakness in markets was offset by growth in personal banking and services. 

• Shares of General Motors Co.
  GM,
  -0.56%
  edged higher, putting them on track to set a record winning streak of 14 sessions.