A remarkable rally in financial stocks boosted bullish sentiment across Wall Street on Friday, propelling both the S&P 500 and Dow Jones Industrial Average to new record levels.

Strong earnings from major U.S. banks helped fuel the broader market, with investors brushing aside mixed economic data released earlier in the day.

The S&P 500, as tracked by the SPDR S&P 500 ETF Trust SPY, surged past the 5,800-point mark, gaining 0.7% on the day and pushing year-to-date returns to nearly 23%.

Simultaneously, the Dow Jones Industrial Average, tracked by the SPDR Dow Jones Industrial ETF DIA, rose 0.8%, hitting 42,780 points and smashing previous records set in late September.

Chart: S&P 500, Dow Jointly Mark All-Time Highs As US Banks Top Q3 Earnings Forecasts

Financial Stocks Drive Wall Street Rally

The financial sector was the primary driver of Friday’s market gains.

The Financial Select Sector SPDR Fund XLF rallied 1.9%, marking its strongest session since November 2023 and hitting a fresh record high.

The rally came as a wave of U.S. banks reported better-than-expected third-quarter earnings, reinforcing confidence in the sector’s resilience.

JPMorgan Chase & Co. JPM delivered a robust performance, with Q3 earnings per share (EPS) of $4.37, exceeding the $4.00 consensus.

Shares surged over 4% by mid-morning trading in New York. Goldman Sachs analyst Richard Ramsden highlighted a “robust beat across every line,” for the largest U.S. bank.

Wells Fargo & Co WFC saw its shares soar 6.2% after posting an EPS of $1.42, beating expectations despite cautious guidance on net interest income for the year.

Bank of New York Mellon Corp. BK also delivered stronger-than-expected results, with BK shares rising 1.8%.

BlackRock Inc. BLK gained 3.4% after upbeat earnings and revenue, as performance fees sharply surprised estimates. BlackRock shares hit a new record high.

Other major banks participated in the rally, with Bank of America Corp. BAC, Citigroup C, Goldman Sachs Inc. GS, and Morgan Stanley MS climbing between 2% and 4.8%. Morgan Stanley also set new all-time highs.

The strength in large-cap banks spilled over to regional players, with the SPDR S&P Regional Banking ETF KRE rallying 3.5%. This helped lift the Russell 2000 index, which gained 1.3% and outperformed large-cap counterparts.

Mixed Economic Data Overshadowed by Strong Earnings

Friday’s economic data included a higher-than-expected Producer Price Index (PPI) and a weaker-than-expected Michigan Consumer Sentiment report for October.

The headline PPI came in at 1.8% year-over-year in September, down from an upwardly revised 1.9% in August, but above expectations of 1.6%. Core producer prices – which exclude energy and food – sharply increased from 2.6% to 2.8% year-on-year, surpassing expectations of 2.7%.

According to preliminary estimates, the University of Michigan’s U.S. consumer sentiment index fell to 68.9 in October 2024, down from a five-month high of 70.1 in September and missing forecasts of 70.8.

Year-ahead inflation expectations rose slightly from 2.7% to 2.9%, while the five-year outlook dipped from 3.1% to 3%.

“Consumers continue to express frustration over high prices. Still, long run business conditions lifted to its highest reading in six months, while current and expected personal finances both softened slightly”, Surveys of Consumers Director Joanne Hsu said.

Despite the mixed economic signals, investors focused on the strong bank earnings and remained optimistic about the upcoming corporate earnings season.

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Image created using artificial intelligence via Midjourney.