What Happened Yesterday
Tuesday, October 13. Bank earnings season started. Wall Street sat down like a restaurant critic with a grudge and sent everything back to the kitchen.
The 30-second version: big banks mostly made more money than expected, and their stocks fell anyway, chip stocks dropped hard early then clawed most of it back; and the inflation report lands at 7:30 this morning. Your 401(k) barely moved. Again.
Close | Move | Mood | |
|---|---|---|---|
S&P 500 | 7,805.45 | -0.02% | Ordered water |
Nasdaq Composite | 27,204.38 | -0.15% | Picked at it |
Dow | 51,670.10 | -0.35% | Sent back the bank special |
Small caps (fund) | 276.70 | -0.43% | Still waiting for a table |
Chip index (SOX) | 12,208.79 | -0.23% | Fell down, got back up, fell a little |
VIX (fear gauge) | 15.27 | +0.39% | Yawned |
10-Year Treasury | 5.22% | Down from 5.24% Fri | Back from vacation |
Gold (fund) | 381.67 | -0.13% | Napping |
Oil (fund) | 153.09 | +1.36% | Nervous again |
Bitcoin | $83,095 | +1.63% | Cheered up |
The S&P 500 slipped 1.79 points. The Nasdaq Composite fell 41.52. The Dow fell 180.45, after being up about 470 points at its best. For the rows marked "fund," the move is what matters, not the price. Energy (+1.80%) led. Health care (-1.35%) was the worst of the 11 sectors. Five of 11 rose.
The Banks Did Their Homework
Wall Street Graded on a Curve
Here's the weird part. Citigroup earned $2.85 a share, above the $2.65 Wall Street expected, per StockStory. The stock fell 5.6%. Why? Its finance chief warned that trading revenue usually drops around 20% in the last three months of the year, and maybe more this time. Wall Street heard "great dinner, dessert is canceled" and only remembered the dessert.
Wells Fargo also beat on profit, $1.87 a share, then missed on net interest income, which is the money a bank makes lending at a higher rate than it pays you on savings. Down 3.1%.
JPMorgan actually missed. It earned $5.57 a share against the $5.94 analysts expected, per Seeking Alpha. Even without an 18-cent hit from investment losses, it was $5.75, per Zacks. Still short. Its bond-trading desk took in 4% less than a year ago, while stock trading jumped 49%. The stock? Down just 0.9%. The one bank that really missed landed the gentlest.
JPMorgan CEO Jamie Dimon said the bank won't let outside AI agents into customer accounts, even as companies like Meta roll out AI assistants such as its new Muse, per CNBC. "You don't want rogue agents, and it could be thousands of them," Dimon said. On Monday, Meta's new AI made its stock pop. On Tuesday, America's biggest bank told it to wait outside. (Meta rose another 2.6% anyway.)
The bills looked fine. JPMorgan's card charge-offs, the debts a bank gives up on, fell to 2.91% from 3.15% a year ago, per Yahoo Finance. Wells and Citi improved too. Regular people are paying their credit cards. Wall Street's own trading desks wobbled. The customers are fine. The waiters are nervous.
J&J Raised Its Forecast by Six Cents
Wall Street Wanted the Whole Dollar
Johnson & Johnson fell 5.73%, a Dow member that lost about $15 per share in one day. The company raised its yearly profit forecast to $11.05-$11.15 a share, per its SEC filing. That's a six-cent bump at the midpoint. Analysts had hoped for more, per MT Newswires. Six cents is a raise like a free breadstick is a meal.
The company also had a bill to pay. Its reported profit dropped to 9 cents a share because of a one-time charge related to its proposed deal to settle lawsuits over its talc powder. Strip out that charge and a couple of deals, and it earned $2.59.
"Raised its forecast" is a headline. "Raised it less than expected" is what the market cares about. On earnings day, you're not graded against last year. You're graded against what everyone already assumed you'd say.
The Chip Stocks Tripped
Then Got Up
The chip index (SOX, a basket of 30 big chip stocks) fell about 3.1% at its worst on Tuesday morning. It finished down just 0.23%. Still, it's its fifth straight losing day, now 7.6% below where it stood last Tuesday.
The worst hit: Applied Materials fell 6.7%. It makes the machines that build chips. At its investor day, it declined to forecast how much the industry will spend on those machines, per Investing.com. Imagine a car dealer who won't say how many cars he'll sell next year because he's not sure the roads get built.
What helped: New York Fed President John Williams, who votes at every rate meeting. He told Bloomberg that one more rate hike "may be appropriate" this year, but "I don't think at this time I have any reason to believe that we would need to do more," per Investing.com. In plain English: one more, then probably done. Stocks bounced off their lows after he spoke, per Bloomberg.
A fifth straight loss sounds grim. But falling 3% and getting back to nearly flat is what a market does when people are still shopping, just pickier. Picky beats panicked.
Quick Hits: Pizza, Oil, Houses, and the $1,000 Test
Domino's fell 4.76%. It beat on profit, $4.60 a share vs. $4.39 expected. But US same-store sales, sales at stores open at least a year, grew just 0.3%, vs. 5.2% a year ago, per StockStory. Its new CEO said smaller orders are squeezing store owners, per a Yahoo Finance report. When people trim the pizza order, things are tight.
Oil climbed Tuesday. The oil fund rose 1.36%, and energy was the best sector. Tuesday night, Saudi Arabia's energy ministry said a Houthi missile hit an Aramco office building in Dhahran, causing a limited fire and no injuries, per Bloomberg and Business Standard. Aramco is Saudi Arabia's state oil company. Brent crude, the global oil price, was around $106 this morning, per Yahoo Finance.
Home sales came in better than expected. Existing home sales hit 3.99 million a year in September, per the National Association of Realtors, beating forecasts, including the 3.96 to 3.97 million we ran yesterday. Small catch: August was revised down to 3.93 million, so part of the "jump" is from a lower starting point.
The $1,000 test: $1,000 in the S&P 500 on January 1 is about $1,140 today. Same as Monday. Treading water, but in a nice pool.
What to Watch Today
Wednesday, October 14 (all times CT). Bets on where the indexes open (futures) were up about 0.1% to 0.2% early this morning for the Dow and S&P 500, per Investing.com and Yahoo Finance.
7:30 AM: September consumer prices (CPI, from the Labor Department). Forecast: about 3.6% from a year ago, up from 3.4% in August (a few forecasts earlier this week said 3.7%). Economists say prices are expected to rise 0.6% in one month, mostly from gas and energy. Without food and energy, the forecast is a calmer 0.2%. That's the number the Fed watches most closely. A hot reading puts an October rate hike back on the table.
Before the bell: round two of the banks. Forecasts: Bank of America $1.11 a share, Morgan Stanley $2.83, BlackRock $14.01. Also reporting: Progressive and State Street.
Chips: ASML, the Dutch maker of the most advanced chipmaking machines, rose about 1.6% in Europe this morning on a strong year-end sales forecast, per Investing.com. A forecast, at least. Applied Materials wouldn't give one. Taiwan Semiconductor reports tomorrow.
Fed talk: Richmond Fed's Tom Barkin speaks at 12:30 PM (no vote this year; they take turns). At 1:00 PM, the Fed releases its Beige Book, a roundup of what businesses in its 12 regions are seeing.
Rate odds: Polymarket, a site where people bet real money on events, puts the odds of an October 28 rate hike at about 18.5%, down from about 19.5% yesterday morning. A December hike sits near 75.5%.
The one thing that could ruin everyone's day
A hot CPI. If prices rose faster than 0.6% in September, or that calmer 0.2% comes in higher, Williams' "one more, then done" starts sounding like "one more, then we'll see." Rate-hike odds jump, and mortgage rates follow, right as home sales started picking up.
Yesterday, Wall Street sent back the bank special, the J&J entrée and the pizza. This morning, the itemized check arrives at 7:30.
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