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The S&P 500 and the Dow scored record closing highs on Friday, with the big boosts from financial stocks after banks reported strong quarterly results while the latest inflation data fueled expectations for a U.S. Federal Reserve rate cut in November. The TSX also extended its record-setting run.

Major U.S. financial companies kicked off earnings season with JPMorgan Chase finishing the session up 4.4% after the lender reported higher-than-expected third-quarter profit and raised its annual interest income forecast.

Shares in Wells Fargo rallied 5.6% after its profit also beat analysts’ expectations. BlackRock stock gained 3.6% after the asset manager reported that its assets under management had hit a record high for the third straight quarter.

Other stocks in the industry rose broadly, making the S&P 500 Financials index the biggest index points boost for the benchmark.

“We’d some good earnings reports from some leading financial companies. That’s a good start to earnings season,” said Evan Brown, Portfolio Manager and Head of Multi-Asset Strategy, UBS Asset Management, adding that it bodes well for the economy.

“When financials do well, this is what a soft landing looks like. It’s a positive overall sign for the economy and sets a positive tone for earnings releases in other industries in the next few weeks.”

For the day, the Dow Jones Industrial Average rose 409.74 points, or 0.97%, to 42,863.86, the S&P 500 gained 34.98 points, or 0.61%, to 5,815.03 and the Nasdaq Composite gained 60.89 points, or 0.33%, to 18,342.94.

For the week, the S&P 500 added 1.1% while the Dow climbed 1.2% and the Nasdaq added 1.1% with all three notching their fifth weekly gain in a row.

Earlier in the day, data from the U.S. Department of Labor showed the Producer Price Index (PPI) for final demand was unchanged on a monthly basis in September, compared to the 0.1% rise expected by economists polled by Reuters.

Friday’s PPI data follows Thursday’s Consumer Price Index (CPI) reading, which was slightly higher than forecast, although weekly jobless claims rose more than expected.

“The market’s pretty convinced that we’re going to have a soft landing and that inflation, even with CPI being a little bit higher than expected yesterday, is going to be moderate,” said Scott Wren, senior global market strategist at Wells Fargo Investment Institute in St. Louis, Missouri.

“If you look at today’s PPI data, the core and final demand were both a little lower than expected ... Inflation’s certainly been moderating and that’s a positive that the market paid attention to.”

Meanwhile, a preliminary reading of the University of Michigan’s October consumer sentiment index stood at 68.9, compared with analysts’ estimate of 70.8.

With the week’s data under their belts, traders kept bets steady for a roughly 88% probability the Fed would cut rates by 25 basis points at its November meeting, and a 12% chance it will leave rates unchanged, according to CME’s FedWatch tool.

During the session the consumer discretionary index was under pressure from an 8.8% slump in shares of Tesla after the EV maker unveiled its long awaited robotaxi, but did not provide details on how fast it could ramp up production or deal with potential regulatory hurdles.

With S&P 500 financial services stocks adding 1.95%, the S&P 500 Banks index added 4.2%. During the session it hit its highest level since February 2022. The KBW regional bank index closed up 3.4%.

The Toronto Stock Exchange’s S&P/TSX composite index ended up 168.91 points, or 0.7%, at 24,471.17 ahead of a long weekend, with the market closed on Monday for the Thanksgiving Day holiday. For the week, the index was up 1.3%, its fifth straight weekly gain, while it was eclipsing the previous day’s record closing high.

“We’re on a coordinated global easing cycle,” said Mike Archibald, a portfolio manager at AGF Investments. “That is quite bullish for stocks. You are going to get a better flow of liquidity.”

“Certainly the bank earnings out of the U.S. this morning were fairly positive ... and that’s having a knock-on effect to the Canadian banks,” Archibald said.

Financials, which account for 30% of the TSX’s weighting, rose 0.8%. It included gains for major banks such as Royal Bank of Canada and Bank of Montreal, but a decline of 4% for the shares of TD Bank, adding to the previous day’s losses.

Industrials were up 1.1% and technology added 1.2%. Nine of the 10 major sectors ended higher.

The Bank of Canada is also expected to continue its easing campaign after a downbeat business survey offset stronger-than-expected jobs data.

Investors are betting the BoC will step up the size of its rate cuts to 50 basis points either at its next decision on Oct. 23 or in December.

Reuters, Globe staff

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