The major domestic equity indexes chalked up small advances on Friday, putting the S&P 500 at its highest closing level in more than five months, as gains in industrials and other areas offset a drop in financials after results from three of the big banks mostly disappointed.

The industrial sector gained 0.6 percent, with Boeing, Caterpillar and 3M all higher in the absence of any trade rhetoric overnight.

The Street was optimistic ahead of what is expected to be a strong second-quarter earnings season, although reports on Friday from three of the largest Wall Street banks failed to enthuse.

Citigroup fell 2.2 percent, the most among financials, after its revenue fell short of estimates due to lower debt underwriting. Wells Fargo was down 1.2 percent after its earnings declined more than expected as lending slowed, and costs rose.

JPMorgan Chase fell 0.5 percent although the bank’s earnings picture exceeded estimates. The S&P 500 financial index closed 0.5 percent lower.

The CBOE Volatility Index closed at its lowest level since June 15.

Meanwhile, the S&P 500 index posted its highest closing level since Feb. 1. The index is now just 2.5 percent from its Jan. 26 record closing high and up 4.8 percent for the year so far.

Investors are expected to keep a close eye on trade talks between the United States and China. Treasury Secretary Steven Mnuchin said Thursday the United States and China could reopen trade talks if Beijing was willing to make significant changes.

Netflix Inc sank 4.3 percent after Deutsche Bank warned the company could fall short of subscriber growth numbers when it reports results on Monday.

Johnson & Johnson fell1.4 percent after a jury ordered it to pay a record $4.69 billion to 22 women who alleged its talc-based products contain asbestos and caused them to develop ovarian cancer.

AT&T fell 1.7 percent because of the Justice Department’s plan to appeal a federal judge’s approval of AT&T’s already closed $85.4 billion acquisition of Time Warner.

Trading volume was among the lowest of the year, with approximately 5.3 billion shares changing hands on the major domestic equity exchanges, as compared to the 6.6 billion share daily average for the past 20 trading days, according to Thomson Reuters data.

Fed Emphasizes Economic Growth

The country’s economic growth has been solid during the first half of the year and the Federal Reserve continues to expect to raise interest rates gradually, the Fed indicated on Friday in its semi-annual report to Congress.

It is the Fed’s second submission to lawmakers since Chairman Jerome Powell took the helm of the Fed in early February. He is scheduled to answer questions on it before lawmakers on Tuesday and Wednesday.

Details of the 63-page report were consistent with the Fed’s current outlook detailed at its policy meetings, which is that strong economic growth and low unemployment require rate rises but that a lack of severe inflation pressures means they can remain gradual.

“Over the first half of this year, overall economic activity appears to have expanded at a solid pace,” the Fed said in its report, adding that the economy continues to be supported by favorable consumer and business sentiment, past increases in household wealth, solid economic growth abroad, and accommodative domestic financial conditions.

As such the Fed “expects that further gradual increases” in interest rates would be appropriate as it strives to continue to nurture an economic expansion that is now the second-longest on record.

The Fed said that the Trump administration’s package of tax cuts had likely contributed to a rebound in consumer spending from a sluggish start to the year and will likely provide a moderate boost to economic growth this year.

The outlook for the economy was referenced by Powell in an interview on Thursday in which he said he believes the economy remains in a “really good place” with recent government tax and spending programs set to boost gross domestic product for perhaps three years. So it should not be a surprise that the Fed sees another two rate hikes by year end.

Elsewhere in the report, policymakers once again flagged that wage growth has been weaker than they would have expected given the current unemployment rate of 4 percent.

Wage gains have been “moderate,” the report said, likely held down by weak productivity and it flagged the possibility that there could still be some further slack in the labor market, with more prime-age workers entering the workforce “if labor demand remains strong.”

Although it did not weigh in heavily, the central bank made reference to the Trump administration’s protectionist trade policies, saying the uncertainty was a concern to financial markets.

Several policymakers have expressed worry trade disputes with key allies and China could slow business investment and Powell said on Thursday that sustained high tariffs on products and services could hurt the economy.