Wall Street was hoping the banks would give it something solid to stand on this morning. Instead, JPMorgan has delivered a rare earnings miss, Nasdaq futures are sliding as the AI chip sell-off spreads from Asia and Europe, and the one market looking relaxed is the one that has spent weeks worrying everybody: US government bonds.
It is a split open. Money is leaving the expensive end of tech, but it is not rushing into the big lenders either. For now it is finding a home in Treasuries.
The Situation Right Now
Nasdaq 100 futures are down about 0.6%, S&P 500 futures are a touch lower and Dow futures are up about 0.3%, according to CNBC data shortly before midday UK time. That repeats Monday’s pattern, when the Dow gained 0.38% while the Nasdaq Composite fell 0.44% and the S&P 500 finished almost flat at 7,807.
Europe is holding up better than tech would suggest. The FTSE 100 is up about 0.6%, helped by its small exposure to chipmakers, while the Stoxx 600 and Germany’s DAX are both up around 0.4% even as ASML, Infineon and STMicroelectronics fall sharply. The VIX, Wall Street’s main measure of expected volatility, is up about 2% near 15.5. That is still a calm reading, but it is drifting the wrong way.
What Changed Since This Morning?
This morning’s brief was about Seoul cashing out of AI, after SK Hynix plunged more than 10% and Samsung Electronics lost over 7%. Since then the selling has travelled west. SoftBank fell 8.5% in Tokyo, European chip stocks dropped between 3% and 5%, and Micron, SanDisk, Seagate and Western Digital are all down around 3% in US pre-market trading.
The trigger is a mix of a rising Chinese competitor, ChangXin Memory Technologies, and some unusually blunt language from Broadcom chief executive Hock Tan, who likened parts of AI investing to a casino and said the cost of capital could become a bigger constraint on the boom than chips or power. Elon Musk added to the nerves by saying China’s ability to scale production, once it learns to make something, is often greater than the rest of the world combined.
The other big change is the banks. JPMorgan, Wells Fargo and UnitedHealth have all reported since the Morning Brief, and the reaction has been anything but uniform.
The Biggest US Market Story
JPMorgan earned $15.3bn, or $5.57 a share, in the third quarter. That is up on a year ago, but well short of the $5.90 analysts surveyed by LSEG were expecting. Stripping out $658m of losses on securities still only gets it to $5.75. Revenue of $50.9bn also came in below forecasts, and Bloomberg reports a surprise drop in fixed-income trading revenue. The shares are down about 3.5% before the open. Before today, JPMorgan had beaten earnings forecasts in 16 of the past 20 quarters, so this is not a bank the market is used to marking down.
Wells Fargo was mixed. Profit rose to about $6bn and beat expectations, but revenue of $21.9bn fell short and net interest income, the money it makes from lending, was a little light. Chief executive Charlie Scharf said consumers are still spending and loan delinquencies are low, while warning that higher rates, higher oil prices and persistent inflation create risks. The shares are off just under 1%.
Why does this matter beyond two banks? Because the rotation out of tech only works if there is somewhere sturdy to go. Banks were the obvious candidate in a world of high yields, but the S&P 500 banks index fell 5.4% last quarter while the wider market rose, and today’s first results have not changed that story. Goldman Sachs and Citigroup are still to come before the open.
Stocks Moving Before The Bell
UnitedHealth is the standout winner, up around 2% after beating forecasts and raising its full-year profit outlook to at least $20.50 a share. Its medical cost ratio, the share of premiums paid out in claims, came in at 88.4%, comfortably better than the 89.9% analysts expected, although its finance chief warned that medical costs remain high by historical standards.
Johnson & Johnson is going the other way, down about 2.5% even though it beat estimates and lifted its outlook. Reuters reports the Middle East conflict weighed on its medical device sales. On the chip side, Micron and SK Hynix’s US-listed shares are among the heaviest fallers, and Broadcom is under pressure after its chief executive’s comments.
FX and the Dollar
The dollar is softer as US yields ease. The dollar index is down about 0.3% near 102.3, which has lifted the euro to around $1.118 and the pound to about $1.324. Against the euro, sterling is still close to its strongest level in around 16 months as France’s budget problems weigh on the single currency. The yen has firmed slightly, with the dollar buying about 158.1 yen.
Bonds
Cash Treasuries are trading again after the Columbus Day holiday, and they have come back in demand. The 10-year yield is down about 5 basis points at roughly 5.19%, the 30-year is near 5.56% and the 2-year is around 4.77%. Bloomberg puts the move down to haven buying as tech wobbles, and lower oil prices help too.
That relief comes with a warning attached. The IMF said on Tuesday that a sharp fall in AI shares could threaten financial stability and that bond yields could spike in a disorderly way as debt and inflation risks build. In the UK, the 10-year gilt yield has eased to about 5.40%, tracking the move in Treasuries.
Commodities
Brent crude is down about 1.9% at roughly $104.60 a barrel and US West Texas Intermediate is down about 2% near $91.90. Traders are weighing President Trump’s decision to let Russia supply diesel to global markets for six months, although Goldman Sachs estimates the extra barrels would knock only $1 to $2 off wholesale diesel prices. Iran has said it intends to restrict traffic through the Strait of Hormuz rather than close it, and the Saudi-Houthi conflict is keeping a floor under prices.
Gold is up about 0.3% near $4,204 an ounce as yields fall, natural gas is down around 1.6% and copper is slightly firmer. Bitcoin is up about 0.7% at around $83,200.
Today’s Remaining Catalysts
Goldman Sachs reports at about 12:30 UK time and Citigroup at about 13:00. JPMorgan’s results call starts at 13:30 and Goldman’s at 14:30, which is also when US cash equities open. Citi’s call follows at 16:00. On the Fed side, Chicago Fed President Austan Goolsbee is doing podcast interviews at midday and 15:00, Richmond Fed President Thomas Barkin speaks at 18:00 and Boston Fed President Susan Collins at 21:00, all UK time. Bank of America and Morgan Stanley report on Wednesday, alongside September US consumer price inflation at 13:30.
Levels Traders Are Watching
For the S&P 500, Monday’s close at about 7,807 is the first reference, with futures hovering near 7,850. For the 10-year Treasury yield, Friday’s close near 5.24% is the line above, with last week’s high near 5.36% beyond it. In oil, the $103 area in Brent is the test of whether the diesel story has legs. On currencies, $1.118 in the euro and 102.3 on the dollar index are the near-term markers, gold around $4,200 matters, and JPMorgan’s Monday close near $334 shows how far the shares have to recover. These are reference points, not targets.
Where That Leaves Us Into The Open
The fair reading going into the open is cautious, with a defensive lean. The evidence is a tech sell-off that has now run through Seoul, Tokyo and Europe, a rare miss from the biggest US bank and a bond rally that looks more like a search for safety than a vote of confidence. On the other side, the Dow is holding up, Europe is firmer, oil is easing and UnitedHealth shows strong results are still being rewarded.
Opportunities today are likely to sit in single stocks, as the gap between UnitedHealth and Johnson & Johnson shows, rather than in the index. The risks are that Goldman and Citi follow JPMorgan lower, that the chip selling deepens once US cash trading starts, and that a hot inflation number on Wednesday undoes today’s fall in yields. The view would improve if the Nasdaq steadies after the open and the banks claw back their early losses. It would worsen if the 10-year yield climbs back above 5.24% while tech keeps falling, because that would mean investors are not even finding comfort in bonds. The markets to watch are Nasdaq futures, bank shares, the 10-year yield, Brent and the dollar.
For beginners, the lesson is that a flat-looking index can hide a lot of movement underneath. When one part of the market sells off and another rises, the headline number can look calm while individual stocks swing hard. This is an educational view of the market, not advice to buy or sell anything.
If you want to see how you would handle a morning like this one, with earnings, a sector sell-off and the bond market all pulling in different directions, the free Samuel & Co Trading trader assessment is a good place to test your approach.
