Stocks surged on Friday as the S&P 500 and Dow Jones Industrial Average reached new highs, driven by a strong start to the third-quarter earnings season from major banks. The S&P 500 climbed 0.7%, the Dow gained 440 points (1%), and the Nasdaq rose 0.45%, leaving it less than 2% below its all-time high.

Investor optimism grew as banks exceeded expectations. JPMorgan Chase rose 4.4% after reporting higher-than-expected profits and revenue, while Wells Fargo increased 5.6% despite an 11% decline in net interest income. Analysts suggested this signals resilience in the banking sector, contributing to broader market gains.

Economic data also played a role in the positive sentiment, with a cooler-than-expected September producer price index easing concerns about persistent inflation. This, combined with moderate consumer price index growth, hinted that the Federal Reserve could achieve its 2% inflation target while keeping interest rates steady.

The Federal Reserve’s rate outlook continues to dominate market focus, with futures now indicating an 86% probability of a quarter-point rate cut in November. Investors remain cautious about future data releases, which could further impact rate expectations.