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Stock market today: Wall Street builds on its winning week following stronger profit reports

Jul 13, 2023, 11:20 PM | Updated: Jul 14, 2023, 7:01 am

NEW YORK (AP) — Stocks are ticking higher Friday following stronger profit reports than expected from several financial giants, keeping Wall Street on pace for another winning week.

The S&P 500 was 0.3% higher in early trading, coming off its highest close since April 2022. The Dow Jones Industrial Average was up 159 points, or 0.4%, at 34,545, as of 9:40 a.m. Eastern time, and the Nasdaq composite was 0.4% higher.

Banks were a focal point of the day after a gaggle of them helped kick off the earnings reporting season.

Wells Fargo rose 2.2% after it also reported stronger profit for the second quarter than expected.

Insurance giant UnitedHealth Group rallied 4.8 % after it said profit growth during the spring was better than feared. It also raised the bottom end of its forecast for earnings for the full year.

On the losing end was State Street, which fell 4.3% after reporting slightly weaker revenue than expected for the latest quarter, though its profit topped forecasts.

The earnings reporting season is just getting underway, and Wall Street’s expectations are low. Analysts are forecasting the worst drop in earnings per share for S&P 500 companies since the spring of 2020. If they’re right, it would also mark a third straight quarter where profits sank.

Such expectations are key for financial markets, because one of the biggest factors that sets a stock’s price is how much profit a company produces. Wall Street nevertheless has rallied hard this week and is on track for its seventh winning week in the last nine because of rising optimism for the other major lever that sets stock prices: how much investors are willing to pay for each $1 of corporate profits.

Two big reports showed that inflation continued to cool across the U.S. economy in June. That bolstered investors’ hopes that the Federal Reserve is close to feeling comfortable enough to halt its blistering campaign to raise interest rates.

The Fed has already hiked its federal funds rate up to a range of 5% to 5.25%. High rates undercut inflation by slowing the economy and putting downward pressure on prices for stocks and other kinds of investments.

The expectation is still for the Fed to raise rates one more time at its next meeting in two weeks. But the building bet is that will be the final hike of the cycle.

Treasury yields rose Friday, paring some of the sharp tumble from earlier in the week brought by traders paring bets for Fed rate hikes later this year.

The 10-year Treasury yield rose to 3.78% from 3.77% late Thursday. But it’s still well below the 3.98% it sat at on late Tuesday, before the inflation reports were released. The 10-year yield helps set rates for mortgages and other important loans.

The two-year Treasury yield more closely tracks expectations for Fed action, and it’s at 4.67%, down from 4.89% late Tuesday.

Hopes for an easier Fed have also helped stocks worldwide to strengthen this week, though markets abroad were mixed on Friday.

___

AP Business Writer Yuri Kageyama contributed.

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Stock market today: Wall Street builds on its winning week following stronger profit reports