US STOCKS-Wall St hits highs as data supports fewer rate hikes

* JPMorgan, Wells Fargo, Citigroup lower after quarterly
results

* June CPI comes in below expectations

* Retail sales fall for second straight month in June

* Indexes up: Dow 0.4 pct, S&P 0.5 pct, Nasdaq 0.7 pct
(Updates to late afternoon)

By Kimberly Chin

July 14 (Reuters) – U.S. stocks were up in late afternoon
trading on Friday, with the Dow and S&P 500 both hitting
intraday record highs after weak economic data dulled prospects
of more interest rate hikes this year.

A decline in bank shares limited the day’s gains, however.

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.

“The data is pointing to this continuation of fairly
accommodative policy which has obviously served the market well
over the last few years. So as far as the market is concerned,
it’s sort of more of the same,” said Lee Ferridge, head of macro
strategy for North America at State Street Global Markets in
Boston.

Chances of a rate hike in December fell to 48 percent after
the release of data, from 55 percent late Thursday.

Earlier this week, the market rose after Federal Reserve
Chair Janet Yellen said future rate hikes could be gradual in
the face of persistently low inflation.

Among the day’s biggest drags were shares of banks following
their results. JPMorgan Chase & Co reported a
better-than-expected quarterly profit, boosted by strong loan
growth and higher interest rates, though it reported its net
interest income for the year would be lower than expected. Its
stock was down 1.1 percent.

Shares of Citigroup were down 0.6 percent and Wells
Fargo fell 1.3 percent, despite reporting quarterly
profits that beat analysts’ expectations.

The S&P 500 financial index fell 0.6 percent and was
the only laggard among the 11 major S&P sectors.

The Dow Jones Industrial Average rose 89.11 points,
or 0.41 percent, to 21,642.2, the S&P 500 gained 12.15
points, or 0.50 percent, to 2,459.98 and the Nasdaq Composite
added 40.69 points, or 0.65 percent, to 6,315.12.

Bank of America, Goldman Sachs and Morgan
Stanley will report results next week.

“The bar for earnings is higher this time around, especially
after the phenomenal (profit) 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.
Analysts estimate second-quarter earnings for the S&P 500
companies rose 8.1 percent from a year earlier. 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 is trading at 17.3 times forward earnings, above
the long-term average of 15 times, according to Thomson Reuters
data.

Advancing issues outnumbered declining ones on the NYSE by a
3.24-to-1 ratio; on Nasdaq, a 1.53-to-1 ratio favored advancers.
(Additional reporting by Caroline Valetkevitch in New York and
Tanya Agrawal in Bengaluru; Editing by Arun Koyyur and Nick
Zieminski)

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