Strong Earnings and Cooling Inflation Drive Market Surge
US stocks experienced a significant upswing on Friday, with both the S&P 500 and Dow Jones Industrial Average reaching record highs. This rally marks a five-week winning streak for all three major stock indexes.
Key Drivers Behind the Market Rally
The S&P 500 closed at a record high, marking its 45th record closing this year and becoming the first index to surpass the 5,800 mark. This surge followed strong third-quarter earnings reports from major US banks, including JPMorgan and Wells Fargo, which alleviated concerns about a potential slowdown in consumer spending.
JPMorgan CEO Jamie Dimon expressed satisfaction with the bank’s performance but cautioned about worsening geopolitical conditions. He has consistently warned investors about the rising risks in the global landscape.
Inflation Concerns Eased by Flat Producer Prices
Further supporting the stock market on Friday was the report on the Producer Price Index (PPI) for September, which showed no month-over-month increase. This flat reading was below economists’ expectations of a 0.1% rise. The core PPI, which excludes food and energy prices, increased by just 0.1%, falling short of the anticipated 0.2% growth.
David Russell, a strategist at TradeStation, commented on the inflation reports, noting that while the Consumer Price Index (CPI) might have appeared high, the PPI did not reflect similar concerns. He added, “Overall, these numbers are getting less impactful as inflation moderates. The Fed could still be on track for 25 basis points at the next two meetings.”
Upcoming Economic Data to Watch
Looking ahead, investors are keenly anticipating the retail sales data set to be released on October 17. Analysts from Bank of America project a robust 0.8% increase in September retail sales, while the consensus estimate is just 0.2% growth.
This combination of positive earnings and easing inflation signals optimism in the market, suggesting that investors may remain bullish in the weeks to come.
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