Wall Street Reacts to Mixed Bank Earnings While Eyeing Inflation Report
Market Overview and Key Developments
By Stephen Culp
NEW YORK, Oct 13 (Reuters) - Wall Street stocks were muted on Tuesday after big banks reported mixed earnings and investors looked ahead to Wednesday's crucial inflation report. The S&P 500 ended essentially flat, while Nasdaq closed slightly lower, weighed by chip weakness.
Third-quarter earnings optimism has been propping up the market, helping it soldier through geopolitical turmoil, surging bond yields and mounting inflation worries. Analysts currently expect year-on-year S&P 500 earnings growth of 30.6% for the July-September period, according to LSEG data.
I will go into more detail on today's market moves below. If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today.
Highlights from Bank Earnings and Market Influences
- Wall Street's big banks posted uneven third-quarter results, as equity and bond markets were roiled by ongoing wars, inflation worries and massive AI outlays
- JPMorgan Chase fell short of quarterly profit estimates for the first time in nearly three years
- Goldman Sachs beats third-quarter profit expectations on dealmaking and equities revenue
- US existing home sales unexpectedly increased in September as rising inventories offered buyers more choice
- US chipmakers slid, led by memory-related firms after reports of a technological advance by China's CXMT raised competition fears
Today's Key Market Moves
- STOCKS: US stocks were muted following mixed bank earnings; European shares pulled lower by AI selloff
- SECTORS/SHARES: Energy shares gain as WTI settles higher, homebuilders gain following upbeat housing data, chips extend Monday's loss; healthcare stocks, commercial airlines among the day's clear underperformers
- FX: The dollar slipped against a basket of world currencies as Brent crude prices eased and investors awaited new clues on the path forward for the Federal Reserve's monetary policy
- BONDS: Long-dated US Treasury yields eased as investors eyed European bond markets, while 2-year yields turned positive on the eve of Wednesday's key CPI report
- COMMODITIES/METALS: WTI crude settled up 0.4% while Brent settled down 0.9% as US-Russia diesel deal offset Saudi Yemen attacks; gold prices eased ahead of Wednesday's CPI report
Today's Talking Points
AI and Technology Risks
Anthropic Warns of Self-Replicating AI Models
Anthropic said on Monday that its experiments suggest small AI models could be months away from self-replicating on internet-enabled items such as smart ovens and TV boxes.
The experiments were aimed at determining whether AI models could find and copy themselves into vulnerable devices, then continue to spread.
Replicating models would be difficult to shut down, as there is no central switch-off, and unlike non-AI malware, they could figure out unfamiliar devices on their own, potentially targeting data center processors, Anthropic warned.
Political and Regulatory Outlook
Potential Democratic Scrutiny of Wall Street and Crypto
Should the US midterm election give Democrats control of one or both congressional chambers, the party could gain subpoena power, and powerful tools to probe Wall Street, prediction markets and cryptocurrency companies.
Polls suggest Democrats are poised to win the House of Representatives and have an edge in the race for the Senate. If the party prevails, it could call agency heads and CEOs to testify, and create headaches and legal entanglements for those under scrutiny.
Democrats are already preparing to investigate President Donald Trump's and his family's ties to crypto and prediction markets, Reuters reported.
Geopolitical Developments
Iran Reviews US Response on Hormuz Proposal
Tehran is still reviewing Washington's proposal regarding the reopening of the Strait of Hormuz and will respond to it via intermediaries when the review is over, according to Iran's foreign ministry spokesperson Esmaeil Baghaei.
After a June interim ceasefire fell apart, Iran presented its proposal in mid-September and later confirmed receipt of a US response. But Iran’s security chief said on Sunday that Washington’s response did not sufficiently address Tehran’s seven conditions for reopening the Strait of Hormuz and returning to negotiations.
AI's Impact on Markets and the Economy
AI as Rocket Fuel for US Stocks, Less So for GDP
Wall Street is not the economy, so we are told. Nowhere is this clearer than the AI revolution, which is firing US stocks to record highs while, simultaneously, weighing on real gross domestic product growth.
Demand for all the equipment that goes into building US AI data centers and infrastructure is surging, but much of it is directed toward imports. This is widening the trade deficit, which, in turn, is a drag on growth; not enough to slow the economy to a halt, but enough to ensure it doesn't accelerate too fast.
What Could Move Markets Tomorrow?
- US CPI (September)
- Developments in the Middle East
- Energy market moves
- US Treasury yield moves
- US Federal Reserve speakers: Fed Vice Chair Michelle Bowman, Richmond Fed President Thomas Barkin
- Social media posts from Trump
- Finland, Sweden, Spain, Poland CPI (September)
- Germany wholesale prices (September)
- Canada building permits (August)
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
(Editing by Nia Williams)
