Dow closes just shy of record as earnings season gets underway By Investing.com

Investing.com– The Dow closed just shy of a fresh closing record despite hitting an all-time on Friday after shrugging off a modest uptick in  wholesale inflation  as investors digested better-than-expected quarterly earnings from a slew of Wall Street banks. 

At 16:00 EST (20:00 GMT), the  rose 1.1% to close just shy of a record of 40,003 set on May 13, though had earlier hit an intraday all-time high of 40,257.24. The  added 0.6% the was up 0.5%

Wall Street bank kick off earnings season

A trio of Wall Street banks including JPMorgan Chase, Citi, and Wells Fargo kicked of the second-quarter earnings season in earnest.

JPMorgan Chase (NYSE:), the largest bank in the United States, reported quarterly results that topped Wall Street estimates, but that was overshadowed by underwhelming net interest income, a key profit measure, for the quarter and loan loss provisions that exceeded analyst expectations amid the impact from higher interest rates.

Wells Fargo & Company (NYSE:) cut its outlook for net interest income, sending shares more than 5% lower , while Citigroup Inc (NYSE:) stock fell nearly 1% after reported earnings.

Investors are looking forward to robust profit growth from a diverse range of companies, which could potentially extend the rally in U.S. stocks beyond the dominant tech sector.

„If analysts’ predictions are accurate, this quarter’s year-over-year EPS growth rate will be the highest since the fourth quarter of 2021,” Bernstein analysts wrote in a note.

Tech-heavy Nasdaq suffered a setback of nearly 2% on Thursday. This decline was influenced by a shift in investor interest from large-cap stocks to smaller companies amid increasing expectations that the Federal Reserve will slash rates in September. 

Market participants are now pricing in an 86% chance of a rate cut by the Federal Reserve in September, an increase from the 72% probability observed a week prior.

Inflation in modest uptick, but expectations remain steady 

The producer price index, or PPI, which measures the average change over time in the selling prices received by domestic producers for their output, rose to a 0.2% last month, contrary to the 0.1% rise anticipated by economists, taking the annualized figure for June to 2.6%. 

Core PCE, which strips out food and energy, rose 0.4% in June and 3% on the year through June, beating economists’ estimates for a 0.2% and 2.5% gain, respectively.

The latest PPI data combined with the recent CPI data, Morgan Stanley estimates, would lift core PCE, the Fed’s preferred inflation measure, to 0.205% in June from 0.08% in May, and to 2.57% for the 12 months through June, and would mark „the second weakest this year.”

The faster pace of inflation, however, was also overshadowed by data from the University of Michigan showing the U.S. consumer expectations of inflation a year from now fell to 2.9% from 3% previously.     

Tesla cuts losses despite UBS downgrade; Carvana accelerates to 52-week high

Tesla Inc (NASDAQ:) jumped 3% Friday, shrugging UBS’ downgrade on the stock to neutral to sell amid valuation worries.

UBS said Tesla’s valuation is increasingly difficult to justify pointing to a lack of visibility and the risk that growth opportunities including in artificial intelligence will take longer than expected to materialize. 

Carvana Co (NYSE:) jumped more than 4% to 52-week high after BTIG started coverage on the stock at a buy rating, citing optimism over future market share gains

(Ambar Warrick, Senad Karaahmetovic contributed to this report)