(Reuters) – U.S. stocks edged higher in late morning trading on Friday as weak economic data dimmed chances of another rate hike this year, while tepid forecasts by JPMorgan and Wells Fargo limited gains.
The financial index .SPSY fell 1.03 percent and was the only laggard among the 11 major S&P sectors.
“The bar for earnings is higher this time around, especially after the phenomenal growth we saw in the first quarter. So companies that miss expectations or guide down will be overly punished,” said Michael Scanlon, portfolio manager at Manulife Asset Management.
Bank of America was the biggest drag on the S&P and Goldman Sachs shaved off 21 points from the Dow.
Analysts estimate second-quarter earnings for the S&P 500 companies rose 7.8 percent from a year earlier, after first quarter earnings posted their best performance since 2011, according to Thomson Reuters I/B/E/S.
Earnings will be closely watched to see if high valuations are justified in the face of tepid inflation and a recent patch of mixed economic data.
The S&P 500 has been trading at about 18 times earnings estimates for the next 12 months, compared with the long-term average of 15 times.
The Nasdaq Composite .IXIC was up 11.84 points, or 0.19 percent, at 6,286.28.
Ten of the 11 major S&P sectors were higher, with defensive sectors such as real estate .SPLRCREC, utilities .SPLRCU and consumer staples .SPLRCS leading the advancers.
Data showed consumer prices were unchanged in June and retail sales fell for a second straight month, pointing to tame inflation and subdued expectations of strong economic growth in the second quarter.
Chances of a rate hike in December fell to 47 percent after the release of data points, from 55 percent at Thursday’s close.
Earlier this week, Federal Reserve Chair Janet Yellen said future rate hikes could be gradual in the face of persistently low inflation.
Among stocks, Nutanix (NTNX.O) jumped 7.5 percent after Goldman Sachs added the cloud data-storage firm to its conviction list.
Advancing issues outnumbered decliners on the NYSE by 1,943 to 774. On the Nasdaq, 1,395 issues rose and 1,239 fell.
Reporting by Tanya Agrawal; Editing by Arun Koyyur