October 15, 2023

Major U.S. Banks Smash Records With Profit Surge

📰 News Organizations

  • JPMorgan Chase Tops Profit Expectations. JPMorgan Chase & Co. posted another quarter of record net interest income and boosted its forecast for the year as the company benefits from higher interest rates and its purchase of First Republic Bank.

  • Wells Fargo's Third-Quarter Results Top Expectations. The higher interest rates offset slowing lending activity. Wells Fargo posted earnings per share of $1.48 in the quarter, or $1.39 excluding discrete tax benefits.

  • Citigroup Reports Better-Than-Expected Revenue For The Third Quarter. Revenue and net income rose by 9% and 2%, respectively, year over year. Citigroup’s institutional clients unit reported $10.6 billion in revenue, up 12% year over year and 2% from the second quarter.

  • Microsoft’s Activision Blizzard Deal Gets Green Light From U.K. Regulator. The U.K.’s Competition and Markets Authority said Friday that the proposed deal no longer poses a major threat to competition in cloud gaming after Microsoft offered to restructure the deal.

  • Canon Begins Selling Chip Machines. Canon Inc. has begun selling its nanoimprint semiconductor manufacturing systems, seeking to claw back market share by positioning the technology as a simpler and more attainable alternative to the leading-edge tools of today.

  • Oil Prices Jump 4% Amid Geopolitical Tensions. Investors remained on edge about escalating geopolitical tensions in the Middle East. The Israel-Hamas conflict has ratcheted up concerns that the fighting may affect regional energy production.

🐦 Twitter

  • US stocks can avoid falling below 4,200 as long as bond yields stay below 5%: BofA’s Michael Hartnett. A drop below that level would be driven by a stronger dollar, higher yields, oil rising above $100 a barrel, and signs of a credit crunch, he wrote. Source.

  • After a brief break in the last few days, we are back to the new normal: Stocks and bonds being positively correlated, particularly during down days. One thing seems evident: We are no longer in the golden era for 60/40 portfolios. Source.

  • The Interest Expense on US Public Debt rose to $883 billion over the past year, another record high. If it continues to increase at the current pace it will soon be the largest line item in the Federal budget, surpassing Social Security. Source.

  • Barring a re-acceleration in worker incomes/core goods inflation (which could happen, can't rule it out), the CPI reports going forward matter more to think about the timing of rate cuts, not rate hikes. Source.

  • We can say that the rate of deceleration is decelerating, but as shelter continues to slow (as rental units in particular come online) there's a very clear path in these numbers to the full soft landing. Source.

  • Even though wage growth in the leisure/hospitality sector has eased from the peak, it remains stronger than at any point before the pandemic per the Atlanta Fed wage tracker. Source.

The secret that underlies most successful entrepreneurs: The ability to switch back and forth between the creative mind and the constant grind. Again, and again, and again.

Dharmesh Shah

📓 Online Publications

  • Foreclosures Continue To Surge. The number of homeowners hit with foreclosure notices in the third quarter of the year jumped 34% from a year ago to nearly 125,000, according to a recent report from real estate data firm ATTOM. They were up 28% from the previous quarter.

  • Mortgage Rates Keep Climbing Higher Above 7%. For the fifth consecutive week, mortgage rates pushed upward, hammering home buyers’ budgets. The 30-year fixed-rate mortgage averaged 7.57% this week, Freddie Mac reports.

  • Housing's Stranglehold On Inflation Poised To Decline In Months Ahead. Inflation rose 0.4 percent in September, a near standstill from August. This leads economists to believe that “shelter” will soon recede as the largest contributor to runaway prices.

  • Shelter Was Up 7.1% Year-Over-Year In September. Down from 7.2% in August. The index for shelter was the largest contributor to the monthly all items increase, accounting for over half of the increase.

  • Renewable Energy Stocks Jumped. Prices for commodities like oil and natural gas are rising, which means electricity prices will likely climb, and those sources are the natural competition for solar and other renewable energy sources.

🎧 Podcasts

  • Strong Job Market Fuels Keeps Consumer Spending High. Despite challenges like a frozen housing market, the strengthening dollar, and rising interest rates, individuals continue to spend, underscoring the pivotal role of sustained employment in the economy. Source(19:29)

  • Ongoing Shift in 10-Year Treasury Buyers. The shift in buyers for 10-year treasuries is still underway, involving the Fed, commercial banks, foreign central banks, and private buyers seeking a term premium, with the U.S. fiscal situation unlikely to be addressed until 2024. Source(32:04)

  • Strong Probability For Fed Pause in November. Jeremy Schwartz says that if the trend of decreasing inflation persists alongside a robust labor market but slowing wage growth, it appears the Federal Reserve is likely to remain on pause next month. Source(14:13)

  • Hollywood Strike Continues After Failed Negotiations. Talks broke off between Hollywood actors and studios, killing any hopes that the three-month strike would come to an end anytime soon. The studios announced that they had suspended contract negotiations. Source(5:18)

  • Novo Nordisk Cements Title as Europe’s Most Valuable Company. Novo Nordisk will stop a large clinical trial testing its diabetes drug Ozempic after an early look at the data found treatment had a kidney benefit. Stocks rose after the news. Source(14:25)