US STOCKS-Dow, S&P notch record closes on dimmed rate hike prospects

* 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 0.6 pct
(Updates to close)

By Kimberly Chin

July 14 (Reuters) – The Dow and S&P 500 hit record highs on
Friday after weak economic data dulled prospects of more
interest rate hikes this year.

A decline in financial shares limited the day’s gains, even
though JPMorgan Chase & Co and other big banks delivered
quarterly results that beat Wall Street expectations.

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.

The S&P financials, which benefit from a rising rate
environment, fell 0.5 percent, and the group was the only one of
the S&P 500 sectors down on the day.

The Dow Jones Industrial Average was up 84.65 points,
or 0.39 percent, to 21,637.74, the S&P 500 gained 11.44
points, or 0.47 percent, to 2,459.27, and the Nasdaq Composite
added 38.03 points, or 0.61 percent, to 6,312.47.

The CBOE Volatility index closed at its lowest since
December 1993.

For the week, the Dow was up 1.1 percent, the S&P 500 was up
1.4 percent, and the Nasdaq rose 2.6 percent.

The Nasdaq’s percentage gain for the week was its biggest so
far this year.

The small-cap Russell 2000 index, which has
underperformed the S&P 500 this year, also ended at a record
high.

Four of the largest lenders beat analysts’ quarterly profit
expectations by raising loan prices without paying much more for
deposits. But analysts said investors had wanted to see even
better results and hear a rosier outlook from executives.

JPMorgan Chase was down 0.9 percent, while shares of
Citigroup were down 0.4 percent and Wells Fargo
fell 1.1 percent.

“In the past few weeks, (financial) stocks have been very
strong. There’s been just a little bit of a sell on the news,
but afterward, you buy on the idea of a good quarter,” said
Peter Tuz, president of Chase Investment Counsel in
Charlottesville, Virginia.

The financial index was down 0.7 percent for the week after
rising 1.5 percent the week before.

Bank of America, Goldman Sachs and Morgan
Stanley all are due to report results next week.
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.

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.

Amazon.com Inc < AMZN.O> shares rose 0.1 percent. The
company has raised flags in Washington, with a Democratic
lawmaker calling for a hearing on how Amazon’s plans to buy
Whole Foods Market Inc will potentially impact
consumers. The deal, announced in June, marks the biggest
acquisition ever for the world’s largest online retailer.

Advancing issues outnumbered declining ones on the NYSE by a
2.54-to-1 ratio; on Nasdaq, a 1.29-to-1 ratio favored advancers.

About 5.3 billion shares changed hands on U.S. exchanges.
That compares with the 6.7 billion daily average for the past 20
trading days, according to Thomson Reuters data.
(Additional reporting by Caroline Valetkevitch in New York and
Tanya Agrawal in Bengaluru; Editing by Nick Zieminski and Leslie
Adler)

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