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 & Co.’s second-quarter profit rose on higher investment banking fees and an $8 billion accounting gain from its stock-swap deal with Visa, but shares in 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 S&P 500 and Nasdaq hitting new highs, investors are hoping to see strong earnings growth from companies outside of big tech companies like Nvidia to 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.
Analysts on average expect S&P 500 profits to rise 10.1% this quarter from a year ago, after falling 2.8% last quarter, according to LSEG IBES data. Financial companies are expected to post a 6.7% profit increase.
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, according to CME Group’s FedWatch tool, up from 72% a week ago.
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, the Dow e-mini was up 22 points (0.05%), the S&P 500 e-mini was up 1.25 points (0.02%) and the Nasdaq 100 e-mini was 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 shares fell 1.7% after UBS downgraded the electric vehicle maker’s shares to “sell” from “neutral.”
US bank BNY rose 2.5 percent after reporting a 10 percent increase in second-quarter net profit.
Communications company AT&T saw its shares fall 1.5% after the company said data from about 109 million customer accounts, including 2022 call and text records, was illegally downloaded in April.
(Reporting by Medha Singh and Ankika Biswas in Bengaluru; Editing by Saumyadev Chakrabarty and Pooja Desai)
