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US stock markets closed positively, with the S&P 500 and Dow Jones reaching record highs, driven by strong bank earnings. Economic indicators showed flat producer prices and a drop in consumer sentiment, while upcoming retail sales data could influence market expectations of a soft landing. The Nasdaq and S&P 500 both secured five consecutive weeks of gains, with technical analysis suggesting potential upward targets if key support levels hold.
U.S. consumers showed resilience in Q3, with solid spending reported by JPMorgan and Wells Fargo, despite inflation concerns affecting lower-income Americans. Both banks increased provisions for potential loan losses, indicating caution amid economic uncertainty, while credit card spending remained robust.
The S&P 500 and Dow reached record highs, driven by strong bank earnings and positive economic signals, with financial stocks leading the gains. The Producer Price Index remained unchanged, supporting expectations for a potential Federal Reserve rate cut in November. Overall, the market reflects confidence in a soft landing for the economy, as advancing stocks outnumbered decliners significantly.
The Producer Price Index (PPI) remained steady in September, with a year-over-year increase of 1.8%, surpassing expectations. Major banks JPMorgan Chase & Co. and Wells Fargo reported third-quarter earnings, with JPMorgan's profits down 2% year-over-year. Meanwhile, Tesla's CEO Elon Musk introduced the Cybercab, priced at $30,000, during the company's Robotaxi Day.
Profits at JPMorgan Chase and Wells Fargo fell but exceeded expectations, indicating a resilient economy despite mixed effects from the Federal Reserve's recent interest rate cut. JPMorgan reported nearly $13 billion in profit, while Wells Fargo earned $5.1 billion, both facing challenges from rising customer deposits at competing banks and concerns over commercial real estate loans. Geopolitical tensions and the upcoming U.S. presidential election add to the uncertainty in the financial sector.
Michigan's Consumer Sentiment preliminary reading is expected to rise to 70.9 in October, while key speeches from Fed officials are anticipated. In the bond market, the 10-year U.S. Treasury yield is at 4.092%. European markets are mixed, with the Euro Stoxx 50 futures down slightly, as investors await U.S. bank earnings and updates on China's fiscal stimulus. The U.K. economy showed growth in August, while Germany's inflation eased to 1.6%. Asian markets closed mixed, with Japan's Nikkei 225 rising on investor adjustments ahead of a holiday, while China's Shanghai Composite fell amid caution over potential stimulus measures. U.S. futures are down as the market awaits crucial PPI data and bank earnings.
As earnings season begins, major US banks face scrutiny over the impact of the Federal Reserve's recent rate cuts on their profitability. Analysts expect net profits for JPMorgan Chase, Wells Fargo, Bank of America, and Citigroup to decline compared to previous quarters, primarily due to reduced lending margins. Investors are particularly focused on net interest income and future outlooks, as banks adjust their borrowing costs and deposit rates in response to changing interest rates.
Wall Street braces for earnings reports from major financial firms, including BlackRock, JPMorgan, and Wells Fargo, with expectations of a modest quarter. The financial sector is projected to see a 0.4% year-over-year earnings decline, largely driven by a 12% drop in bank earnings due to rising deposit costs. In contrast, other financial industries are expected to show positive growth, with Capital Markets leading at 11%.
US inflation data is in focus this week following a surprisingly strong jobs report, with expectations for headline inflation to dip to 2.3% while core inflation remains steady at 3.2%. The robust labor market, highlighted by a drop in the unemployment rate to 4.1%, may influence the Federal Reserve's future interest rate decisions, potentially shifting from larger cuts to smaller ones. As bank earnings season begins, major institutions like JPMorgan and Wells Fargo will report Q3 results, providing insights into profitability amid changing rates.
Big U.S. banks are expected to report lower third-quarter earnings due to rising deposit costs, with net interest income declining for most, except Bank of America and Goldman Sachs. Consumer loan growth remains stagnant, and concerns over rising charge-offs persist. However, potential Fed interest rate cuts could improve profitability and investment banking revenue in the future.
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