Wall Street closes higher on bets for Fed rate cut
JPMorgan, Citi, Wells Fargo drop after results
Small-cap stocks surge
U.S. producer prices rise marginally in June
Updates with market close
By Noel Randewich and Medha Singh
July 12 (Reuters) -Wall Street stock indexes closed higheron Friday, on bets that the U.S. FederalReserve will cutinterest rates in September, while big banks fell after reporting mixed results.
Some of the market's most valuable companies bounced back after dipping in the previous session, with rallies by Apple AAPL.O andNvidia NVDA.O.
JPMorgan Chase's JPM.N second-quarter profit was lifted by rising investment banking fees. However, shares of the world's largest bank dipped.
Wells Fargo WFC.N tumbled afterthe lender missed estimates for quarterly interest income, while Citigroup C.N fell despitereporting a surge in investment banking revenue.
The small-cap Russell 2000 .RUT rallied for a third straight day and reached the highest since 2022, while the S&P 400 Mid Cap index .IDX also jumped.The two indexes have lagged the S&P 500 this year.
"That rotation into small- and mid-caps is still continuing and that's a positive sign overall," said Ryan Detrick, chief market strategist at Carson Group.
According to preliminary data, the S&P 500 .SPX gained 31.92 points, or 0.57%, to end at 5,616.46 points, while the Nasdaq Composite .IXIC gained 113.58 points, or 0.62%, to 18,396.98. The Dow Jones Industrial Average .DJI rose 260.02 points, or 0.65%, to 40,013.77.
With stock indexes trading around recordhighs, investors are betting on strong profit growth from companies beyond Nvidia NVDA.O and other heavyweights that have benefited from explosive growth in artificial intelligence computing.
Analysts expect second-quarter earnings for S&P 500 firms to jump 9.6%, with strong growth from technology companies but declining earnings in real estate, industrials and materials, LSEG IBES data showed.
"The thematic appeal of the AI story is still very much there," said Zachary Hill, head of portfolio management at Horizon Investments in Charlotte, North Carolina. "We just need to see an inflection in earnings growth coming from the rest of the market, and that's something that we're going to be watching for quite intently over the next couple weeks."
Data showed producer prices were slightly hotter-than-expected in June but that did little to change bets on the first rate cut in September. The report follows data showing a surprise fall in U.S. consumer prices on Thursday.
Traders are betting on a 94% chance of a rate cut by September, up from 78% a week ago, according to CME Group's FedWatch.
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Reporting by Noel Randewich in Oakland, Calif. and Medha Singh and Ankika Biswas in Bengaluru; Editing by Saumyadeb Chakrabarty, Pooja Desai and Richard Chang
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