Stocks close slightly higher on bank earnings

Stocks closed higher Friday but pulled back from earlier highs after three big U.S. banks reported quarterly profits that topped forecasts, boosting hopes on Wall Street that third-quarter earnings will be better than feared and mark the end of the so-called earnings recession.

Powered by upbeat bank earnings, the Dow Jones industrial average rose 39 points, or 0.4%, to 18,138 after being up as much as 160 points earlier. The broad Standard & Poor's 500 stock index was up less than 0.1% to 2133 and the Nasdaq composite added less than 0.1% to 5214.

Before the opening bell, JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC), which is embroiled in a crisis over fraudulently opening customer accounts, all posted profit and sales numbers that exceeded analyst expectations. Bank shares were mixed after sharp early gains. Shares of JPMorgan were down 0.3% and Citigroup stock was 0.3% higher. Wells Fargo was flat.

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Wall Street is hoping the S&P 500 will break a string of four straight quarters of contracting profit growth when the third-quarter earnings season is complete.

Investors also digested remarks from Federal Reserve Chair Janet Yellen. She said in prepared remarks the Fed may want to keep interest rates lower for longer to reverse the prolonged negative effects of the Great Recession.

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U.S. retail sales rose 0.6% in September, coming in line with forecasts, another signal that the U.S. consumer is holding up well. Inflation at the producer level rose 0.3% last month, more than the 0.2% consensus estimate, according to the latest monthly reading on the producer price index.

The trio of bank beats in the U.S. provided a lift to stocks in Europe. The broad Stoxx Europe 600 index was 1.3% higher, and the German DAX was up 1.6% and the CAC 40 in Paris was 1.5% higher.

Shares also rose in Japan, with the Nikkei 225 up 0.5%.