### Dow and S&P 500 Reach Record Highs Amid Strong Bank Earnings and Fed Rate Cut Expectations

The Dow Jones Industrial Average and the S&P 500 soared to record levels on Friday, spurred by robust earnings from major banks and fresh economic data bolstering expectations of a Federal Reserve rate cut in November. The Dow leaped 317 points, or 0.8%, hitting an intraday peak of 42,835.48. This strong performance was largely attributed to significant gains in bank stocks. Concurrently, the S&P 500 advanced by 0.5%, while the Nasdaq saw a modest increase of 0.3%. All three indexes seem poised to extend their winning streak to a fifth consecutive week.

The rally was ignited by promising earnings reports from leading financial firms, which kicked off the earnings season in full swing. JPMorgan Chase saw its stock surge 5% after reporting better-than-expected third-quarter profits and improving its annual interest income forecast. Similarly, Wells Fargo enjoyed a 5.7% rise as its earnings also surpassed analyst expectations. BlackRock climbed 3.1% following news that its assets under management had reached a record high for the third straight quarter.

However, the Nasdaq's gains were capped by a 7.8% drop in Tesla's shares. The electric vehicle manufacturer introduced its long-awaited robotaxi but failed to provide details on production timelines or regulatory strategies, spooking investors.

Economic data from the Department of Labor showed the Producer Price Index for final demand remained flat in September, contrary to economists' prediction of a 0.1% rise. This adds weight to the speculation of a 25-basis-point interest rate cut from the Federal Reserve next month, with traders pricing in an 88% likelihood according to CME's FedWatch.

This latest data follows a mixed bag of economic signals, including a somewhat higher-than-expected Consumer Price Index and a sharper than anticipated rise in weekly jobless claims. Matt Rowe, head of portfolio management and cross-asset strategies at Nomura Capital Management, commented on the Fed's delicate balancing act, "The Fed is trying to thread the needle between not creating inflation through accommodative policy but not letting the labor markets fall apart. The conflicting data over the last week shows that challenge."

With the major indexes hovering at record highs and the S&P 500 up over 21% for the year, the third-quarter earnings will serve as a critical test of the rally's durability into 2024. Rowe added, "The success of banks this quarter won't be universal. With valuations where they are... I would say outperformance is already priced into some degree."

In another development, the preliminary reading of the University of Michigan's October consumer sentiment index was reported at 68.9, below analysts' estimate of 70.8.