US Stock Market Overview – Stocks Close Mixed; Banks Outperform in the Q3

 

 

US stocks were mixed on Tuesday as the Dow and the S&P 500 closed lower and the Nasdaq notched up gains. All sectors in the S&P 500 index were lower on Tuesday driven down by losses in Real Estate and Financials, Consumer Staples was the best performing sector in a down tape. The big banks led off the earnings parade on Tuesday, with JP Morgan and Citigroup beating on the top and bottom line. US CPI came out in line with expectations, keeping US yields subdued. The dollar rallied which generated headwinds for the multinational companies.

Big Banks Start in the Black

Two of the largest US banks report financial results on Tuesday that came in better than expected. JPMorgan Chase & Co. reported that Q3 profit rose 4% from a year ago, beating expectations. Citigroup also delivered better-than-expected results. Strong gains in trading and investment banking continue to drive earnings.

Trading revenue jumped 30% at JPMorgan and 17% at Citigroup. Both banks set aside fewer reserves to cover bad loans in the quarter. JPMorgan set aside $611 million for potential future loan losses, far less than expected and the $10.47 billion it booked in the second quarter. Citigroup set aside $2.26 billion, down from more than $7 billion in each of the past two quarters. Despite the better than expected financial results, the financials were some of the worst performers in the S&P 500 index.

Inflation in the US Rises in Line with Expectations

The consumer price index rose by 0.2% last month after gaining 0.4% in August. Expectations were for CPI to rise by 0.2% in September. The CPI advanced 0.6% in both June and July after falling in the prior three months as business closures to slow the spread of the coronavirus weighed on demand. A 6.7% jump in the prices of used cars and trucks again accounted for most of the increase. People who want to avoid public transportation scrambled to purchase used vehicles.

That was the biggest gain since February 1969 and followed a 5.4% advance in August. New motor vehicle prices rose 0.3%. On a year-over-year basis, the CPI increased by 1.4% after rising 1.3% in August. Excluding the volatile food and energy components, the CPI climbed 0.2% after rising 0.4% in August. The so-called core CPI gained 1.7% year-on-year, matching August’s increase.