Friday’s mixed results for the session and week ended with prominent US banks beginning the earnings season with positive profits and investors remaining cautious due to the growing tension in the Middle East.
The only index that finished the day up was the Dow Jones Industrial Average (^DJI), which increased by 40 points, or 0.12%. The tech-heavy Nasdaq Composite (^IXIC) fell roughly 1.2%, while the S&P 500 (^GSPC) dropped 0.5%.
Friday marked the official start of the third quarter earnings season for Wall Street banks, as both JPMorgan (JPM) and Wells Fargo (WFC) posted better-than-expected profits.
The outcomes will be closely examined to determine whether the two-year decline in dealmaking is finally abating and to learn how well banks are positioned for the Fed’s higher-for-longer interest rate policy.
See more about the implications of a Fed rate-hike pause for credit cards, loans, bank accounts, and CDs.
The 10-year Treasury yield (^TNX) dropped to 4.63%, about 8 basis points lower, on indications that Israel is about to start a ground invasion of Gaza. On Thursday, bond yields increased and stocks ended a four-day winning streak as data revealed that US headline inflation has stayed stable.
Concerns about the Middle East and the US’s tightening of sanctions on the supply of crude to Russia on Thursday caused oil prices to soar in the commodities market. While Brent crude futures (BZ=F) gained 4%, crude oil futures (CL=F) increased by more than 4%.
On the business front, Microsoft (MSFT) completed its $69 billion acquisition of Activision Blizzard (ATVI), the company that makes “Call of Duty,” following the UK antitrust regulator’s approval of the transaction.
As investors processed the big bank earnings and a negative consumer confidence index that clung to inflationary fears, Wall Street concluded the week with mixed results. Overall, the indexes produced inconsistent weekly outcomes.
The Dow Jones Industrial Average (^DJI) increased by 0.12%, or 40 points, but the S&P 500 (\GSPC) slightly declined. 1.2% was lost by the tech-heavy Nasdaq Composite (^IXIC). The Dow and the S&P both showed weekly gains. However, the Nasdaq ended the week just below its previous levels.
The second week of October trading is coming to an end, and earnings season is heating up. There are a slew of quarterly reports scheduled over the next days, including AT&T, Netflix, Tesla, and Bank of America profits. In addition, investors will have to deal with new economic data and comments from Fed Chair Jerome Powell. Brent Sanchez of Yahoo Finance offers a visual summary of the things to look out for the upcoming week:
Rising Treasury yields, according to some Fed members, are a convenient way to slow the economy without going through the hassle of hiking rates once more. Raising yields can, in essence, take over the role of central bankers by acting as a rate hike substitute without actually raising interest rates.
Furthermore, the economy has previously experienced phantom rate hikes. Fed Chair Jerome Powell stated in March that the volatility around bank failures and their impact was roughly equivalent to another rate hike.
However, a spike in inflation or other unfavourable data could compel the Fed to act, as it did with its prior rate hikes. Additionally, if rates decline, the tightening effect they have would be lessened, making the Fed more necessary.
As the market transitions to a period of “high for longer” interest rates and the Fed works to bring inflation down to its objective of 2%, the biggest banks in the country seem to be doing well.
Numerous banks released strong profits on Friday.
Despite the challenges that banks are facing this year, JPMorgan Chase’s (JPM) profits increased in the third quarter, solidifying the company’s leadership in the industry. The $13.2 billion in earnings announced by the New York behemoth represented a 35% increase over the same period last year. At $40.7 billion, its revenue increased by 21%. Both its revenue and net income exceeded Wall Street forecasts. The share price increased by almost 2%.
WFC and Citigroup (C) both reported better-than-expected results on Friday.
Citigroup, whose stock increased by over 2%, posted profits that were mostly consistent with revenue growth from trading and investment banking fees. Wells Fargo’s stock increased by more than 2% following the company’s announcement that third-quarter earnings increased due to increasing loan interest payments from consumers. When compared to the same period previous year, revenues climbed by over 20% for the quarter.
Friday afternoon saw Wall Street give up some of its gains as investors processed the large bank earnings and a consumer sentiment report that dropped due to inflation worries.
The Dow Jones Industrial Average (^DJI) increased by 0.4%, or 140 points, but the S&P 500 (\GSPC) slightly declined. The tech-heavy Nasdaq Composite (~IXIC) experienced a 0.8% decline.
The possibility of a rate hike in November or December is decreasing, but consumer confidence is still declining, which is drawing more attention to the Fed’s efforts to control inflation.
For its initial October reading, the University of Michigan Consumer Sentiment Index saw a 7% decline. As a result of the ongoing burden of high costs, sentiment declined across almost all demographic categories, according to Joanne Hsu, director of the university’s Surveys of Consumers.
According to a note by Wells Fargo analysts released on Friday, consumers’ mindsets were probably affected by the troubling turn of events, which included the growing bloodshed in the Israel-Hamas conflict and the turbulence in Congress over the future Speaker of the House.
The possibility of a rate hike later this year is decreasing, which is consistent with the increasingly negative sentiment. The most recent inflation data was released on Thursday, the day before the survey was released, and it indicated that prices increased in September at a rate that was similar to that of August. The information supported the argument that the Fed has to undertake more work to bring inflation back down to its target level of 2%.
Markets were, however, suggesting that the Fed will probably keep rates unchanged in November. Furthermore, the likelihood that the Fed will hike rates in December is dwindling. According to data from the CME Group, as of Friday morning, markets were pricing in a 92% chance that the Fed will keep rates where they are in November. The likelihood of a December
The casino industry’s largest-ever merger has finalised, ending a drawn-out legal struggle with government authorities over worries about competition and concentration.
The largest-ever merger in the gaming industry, according to a regulatory filing from Activision Blizzard (ATVI) and Microsoft (MSFT), was completed on Friday. This acquisition represents the latter company’s acquisition of “Call of Duty” creator Activision Blizzard (ATVI), as reported by Yahoo Finance’s Alexis Keenan and Daniel Howley.
After Microsoft passed the UK’s Competition and Markets Authority’s (CMA) last obstacle, the purchase was finalised. The antitrust authority was concerned that the merger would give Microsoft an unfair advantage in the cloud gaming sector. However, the regulator noted that concessions made in a revised acquisition agreement with Activision allayed their concerns.
According to a press statement from the CMA, “The new agreement will prevent Microsoft from stifling competition in cloud gaming as this market takes off, maintaining competitive prices and services for UK cloud gaming customers.”
Following Sony (SONY) and Tencent, the acquisition places Microsoft as the third-largest video gaming firm globally in terms of revenue.
Rising rates, sticky inflation, and a collapsing stock market are negatively affecting consumers’ perceptions of the US economy as it stands right now.
The University of Michigan Consumer Sentiment Index dropped from 68.1 in September to 63 in its initial estimate for October. The largest one-month decline since the regional banking crisis in March was the 7% decline.
Neither are Americans feeling as optimistic about inflation’s decline following a string of stubborn inflation data. The current inflation estimate for the coming year is 3.8% price growth. Consumers predicted 3.2% inflation last month.
“One-year expected business conditions plunged about 19%, and assessments of personal finances declined about 15%, primarily on a substantial increase in concerns over inflation,” according to the poll release from Surveys of Consumers Director Joanne Hsu.