US equity indexes experienced a notable rise on Friday, particularly after the quarterly earnings reports from major banking institutions bolstered investor sentiment. This positive market response effectively countered the mixed signals provided by producer price inflation data, which in turn contributed to a decline in most government bond yields.
The Nasdaq Composite saw an increase of 0.2%, closing at 18,320.7, while the S&P 500 climbed 0.4% to reach 5,804.9. Additionally, the Dow Jones Industrial Average surged by 0.6% to settle at 42,722.8. Remarkably, both the S&P 500 and the Dow set new all-time highs during intraday trading, showcasing the robust performance of the equity markets.
Most sectors showed positive momentum, with the exception of consumer discretionary and technology, where a slight pullback was noted. Notably, financials and industrials emerged as the frontrunners in terms of gains. In a significant development, JPMorgan Chase reported a surprising rise in its Q3 earnings compared to the same period last year.
The bank's revenue not only surpassed market estimates but was also bolstered by solid gains in its investment banking division. As a result, JPMorgan's shares surged by an impressive 4.9% during intraday trading, making it the top performer on the Dow. Analysts at Raymond James noted that consumer spending remained relatively robust, credit trends continued to be favorable, and fee income exceeded expectations, contributing to an optimistic outlook following JPMorgan's results.
Similarly, Wells Fargo reported Q3 earnings that exceeded analysts' expectations, driven primarily by trading gains and an increase in investment banking fees, which lifted noninterest income significantly. The market responded positively, with Wells Fargo's shares jumping 6.2% during the session, marking it as the third-largest gainer on the S&P 500.
In the bond market, most US Treasury yields witnessed a decline, with the 10-year yield decreasing by 1.7 basis points to 4.08%. The two-year yield also fell by six basis points, settling at 3.94%. On the inflation front, the US Producer Price Index (PPI) remained steady in September, following a 0.2% increase in August.
The core PPI, which excludes food and energy prices, increased by 0.2% as anticipated, following a higher 0.3% gain in the previous month. Year-over-year, the PPI rose by 1.8% in September, showing a slight slowdown from the 1.9% increase reported in August. Meanwhile, the core PPI grew from 2.6% in August to 2.8% in September.
Stifel Chief Economist Lindsey Piegza remarked in a note that recent job reports, paired with mixed inflation signals, indicate that the Federal Reserve should recalibrate its focus towards inflation, emphasizing that achieving the target inflation level of 2% is not guaranteed. In the commodity markets, gold prices experienced a rise of 1.4%, reaching $2,676.40 per ounce, while silver increased by 1.6% to $31.76.
Meanwhile, the University of Michigan's preliminary consumer sentiment index dropped to 68.9 in October, down from 70.1 in September, which contrasted with expectations of an uptick to 71.0. Survey respondents indicated a rise in one-year inflation expectations to 2.9%, up from 2.7% in the prior month, while five-year inflation expectations dipped slightly to 3% from 3.1%.
In commodities, West Texas Intermediate crude oil saw a decline of 0.8%, settling at $75.23 per barrel. On the geopolitical front, Israel's security cabinet is still deliberating its response to a recent missile attack from Iran, as reported by CNN citing an unnamed source. Crucially, the dialogue between US and Israeli positions appears to be narrowing, with US President Joe Biden urging that any retaliation from Israel should be proportional.
In company-specific news, Tesla's shares faced a significant decline of 7.8% intraday, making it the worst performer on both the S&P 500 and the Nasdaq. The electric vehicle manufacturer announced the introduction of its driverless Robotaxi concept. Tesla CEO Elon Musk indicated plans to begin producing the Cybercab by 2026, aimed at a price point of under $30,000.
Additionally, Musk introduced a new 'Robovan' which could accommodate up to 20 passengers. However, the market reaction was mixed, with some analysts expressing disappointment over the lack of a comprehensive rollout strategy..