(Refiled to remove unnecessary figures from paragraph 7. Article previously amended to correct comparison period in same paragraph)
Medha Singh and Ankika Biswas
(Reuters) – Wall Street got off to a subdued start on Friday as investors digested mixed earnings from big banks, while a slightly better-than-expected producer price index helped temper expectations that the Federal Reserve will start easing interest rates in September.
JPMorgan Chase (NYSE:) posted a rise in second-quarter profit thanks to higher investment banking fees and an $8 billion accounting gain from its stock-swap deal with Visa (NYSE:), but shares of the world’s largest bank fell 0.2% in choppy premarket trading.
Wells Fargo fell 5.5 percent after quarterly interest income fell short of expectations, while Citigroup rose 2.8 percent after reporting a surge in investment-banking revenue and a profit in its services division.
The results came as some of the biggest U.S. banks forecast lower second-quarter profits due to lower interest payments and higher provisions for bad loans.
With the Stock Market and Nasdaq indexes hitting new highs, investors are banking on strong earnings growth from companies outside of big tech names like Nvidia (NASDAQ:) that could extend the rally in U.S. stocks.
“Earnings from the big banks, big tech companies and consumer goods companies will be the ones to watch the most as they are heavily dependent on the strength of the economy,” said Clark Bellin, president and chief investment officer at Bellwether Wealth.
According to LSEG IBES data, analysts on average expect S&P 500 companies’ profits to grow 10.1% this quarter compared with the same period last year, but to fall 2.8% in the same period in 2023. Financial companies are expected to see profits increase 6.7%.
Data released on Thursday showed U.S. consumer prices unexpectedly fell, strengthening expectations of a rate cut in September, but the latest report showed producer prices rose 0.2% month-on-month in June, beating the forecast of a 0.1% increase. For the year, they rose 2.6% compared to the expected 2.3% increase.
“Friday’s better-than-expected producer price index is an important reminder that inflation is still there and that inflation data can be volatile,” Belin said.
Traders still see a 93% chance of a September rate cut, up from 72% a week ago, according to CME Group’s (NASDAQ:) FedWatch tool.
Attention now turns to the University of Michigan Consumer Survey Report, which will be released after markets open.
As of 8:47 a.m. ET, they were up 22 points (0.05%), up 1.25 points (0.02%) and down 1.5 points (0.01%).
The S&P 500 and Nasdaq hit their lowest levels in more than two months on Thursday, sparking a rotation out of large-cap stocks that have underperformed this year into smaller and mid-cap stocks that are on track to post their first strong week in four weeks for the Dow Jones Industrial Average.
Tesla (NASDAQ:) fell 1.7% after UBS downgraded the electric vehicle maker’s stock to “sell” from “neutral.”
US bank BNY rose 2.5 percent after reporting a 10 percent increase in second-quarter net profit.
AT&T (NYSE:) fell 1.5% after it said data from about 109 million customer accounts, including call and text records for 2022, was illegally downloaded in April. (This story has been corrected to change the comparison period to the same period last year instead of the previous quarter and to remove unnecessary figures in paragraph 7.)
