Wall Street wanted the banks to steady the ship this week. Instead, Bank of America has followed JPMorgan with a disappointing quarter, the chip stocks are refusing to cheer even the best news the sector could ask for, and everything now waits on one US inflation number at 13:30 UK time.
It is a nervous, narrow open. US futures are slightly higher, but nobody is committing much money until the September consumer price figures are out.
The Situation Right Now
S&P 500 futures are up about 0.2% and Dow futures about 0.3%, while Nasdaq 100 futures are flat, according to CNBC data shortly before midday UK time. That follows a soft Tuesday, when the S&P 500 slipped to 7,805, the Dow lost 0.35% and the Nasdaq Composite fell 0.15%.
Europe is having a better day. The Stoxx 600 is up about 0.6%, with Germany’s DAX and France’s CAC 40 both up around 0.5%, and the FTSE 100 is up about 0.3% near 10,685. The VIX, Wall Street’s main measure of expected volatility, is steady near 15.3. That is a calm reading, which is slightly surprising given what is coming this afternoon.
What Changed Since This Morning?
This morning’s brief set out why oil would push the headline inflation rate higher today and why the core rate would decide what the Federal Reserve does next. That still stands. What has changed is the earnings picture.
Bank of America reported before the US open and came in short. Earnings were 91 cents a share against about $1.10 expected, according to CNBC and LSEG, although that figure includes the $1.2 billion US Treasury penalty announced on Tuesday, which the bank says knocked roughly 17 cents off the quarter. Revenue was about $30.0 billion against $30.69 billion expected, and that part has nothing to do with the fine. The shares are down about 3.5% in pre-market trade.
The other change is in chips. ASML, the Dutch company that makes the machines used to produce the world’s most advanced chips, lifted its outlook for the third time this year and said demand will outrun its capacity through 2028. Its shares rose in Amsterdam this morning, but the US-listed stock has now turned lower before the open.
The Biggest US Market Story
The big story is that the bank trade has stopped working. Coming into this week, the popular idea was simple: if tech wobbled, money would rotate into the big lenders, which have been earning plenty from higher interest rates. JPMorgan’s rare miss on Tuesday dented that idea, Citigroup fell 5.6% even after beating forecasts, and now Bank of America has missed on revenue as well as profit.
The fine matters beyond the numbers. A $1.2 billion penalty for failing to police suspicious transactions raises awkward questions about controls at the second-biggest US bank, and investors tend to pay less for a bank when they are unsure what else might turn up. Morgan Stanley reports shortly, with analysts looking for earnings of about $2.91 a share on revenue of about $19.95 billion, and its shares are up about 0.5% before the numbers.
Stocks Moving Before The Open
Bank of America is the obvious mover, down about 3.5% at around $52. JPMorgan is flat after Tuesday’s fall. Progressive is up about 0.9% ahead of its own results this morning.
ASML’s US shares are down about 1.2%, giving back an early gain. That is the strange part of the day. The company has just told the world its customers want more machines than it can build, some are already asking about orders for 2029 and 2030, and the stock still cannot hold a rally. The Philadelphia Semiconductor Index fell for a fifth session in a row on Tuesday, with Applied Materials down nearly 7% and Micron down 3.6% on worries about Chinese competition in memory chips. When good news cannot lift a sector, it usually means investors are more worried about price than about demand.
FX and the Dollar
The dollar is flat ahead of the inflation figures, with the dollar index near 102.2. The pound is steady around $1.326 and sterling remains strong against the euro, with the euro buying about 84.4 pence, close to the pound’s best level against the single currency in about 16 months. Dollar-yen is near 158.4.
The pound has had help today from the Bank of England’s chief economist Huw Pill, who sounded doubtful that the four rate rises some traders had priced in will be needed, and from a Financial Times report that Chancellor John Healey will pay for his Budget measures without borrowing more. Gilts have rallied on both.
Bonds
US Treasuries are a little firmer. The 10-year yield is about 5.20%, down nearly 2 basis points on the day, while the two-year yield is about 4.78%. The 30-year yield is about 5.55%. A basis point is one hundredth of a percentage point, so these are small moves, but the level is what matters. The 10-year is still close to its highest in decades, and that makes every inflation report a bigger event than usual.
UK gilts are stronger again, with the 10-year gilt yield down to about 5.41%.
Commodities
Oil is higher. Brent crude is up about 0.9% near $106.60 a barrel and US crude is up about 1.3% near $95.40. Saudi Arabia’s energy ministry said an administrative building belonging to Saudi Aramco in Dhahran was attacked overnight, and the International Energy Agency warned this morning that diesel shortages could run well into 2027. Hedge fund manager Paul Tudor Jones told CNBC he thinks oil could rally another $20 to $25 a barrel. That is one investor’s view, but it shows how many people are positioned for higher prices.
Gold is down about 0.3% near $4,166 an ounce and silver is down about 1.2%, with high real yields making metals that pay no interest less attractive. Copper is flat. Bitcoin is a touch higher near $83,350.
Today’s Remaining Catalysts
The day turns on the September consumer price index at 13:30 UK time. Economists surveyed by The Wall Street Journal expect prices to have risen about 0.6% in the month, taking the annual rate up to 3.6% from 3.4%, almost entirely because of petrol. The number that matters more is core inflation, which strips out food and energy. That is expected to have risen about 0.2% in the month, slower than August’s 0.3%, with forecasts ranging from 0.16% to 0.24%.
That gap matters for the Fed, which raised rates in September for the first time in three years. Rate futures were pricing roughly a one-in-four chance of another rise this month and a strong chance by December, according to ThinkMarkets. A hot core reading would make an October move look more realistic. A soft one would support New York Fed President John Williams, who said this week he sees no need for rate rises in 2027.
After that, the US cash market opens at 14:30 UK time. Morgan Stanley’s results are due before then. The Fed’s Beige Book, its survey of business conditions around the country, lands at 19:00 UK time, and Richmond Fed President Tom Barkin speaks later today.
Levels Traders Are Watching
These are reference points, not targets. On the S&P 500, Tuesday’s close at 7,805 is the first line. A fall back below it after the open would mean today’s futures gain has been lost. For the US 10-year yield, 5.24% is the level to watch, because that is where it stood before this week’s bond rally. For Brent, $105 is the near support and $110 would bring the recent highs back into view. Gold has round-number interest at $4,200 above, and for the pound, $1.33 is the next big figure.
Where That Leaves Us Into The Open
The fair reading going into the open is cautious, with no strong lean either way until 13:30. The evidence on the cautious side is a second disappointing big bank in two days, a chip sector that cannot rally on excellent news and oil climbing again on attacks in the Gulf. On the other side, futures are holding up, Europe is firmer, bond yields are a little lower and the core inflation forecast is softer than last month.
Opportunities are likely to sit in the reaction to the inflation number and in single stocks such as the banks, rather than in a steady trend in the index. The main risk is a hot core reading that pushes the 10-year yield back above 5.24% and makes October rate rise talk serious again, which would hit tech and the banks at the same time. The view would improve if core comes in at or below 0.2%, yields fall and the chip stocks finally find buyers. The markets to watch are the 10-year yield, Nasdaq futures, bank shares, Brent and the dollar.
For beginners, the lesson today is to be careful around big scheduled data. Prices can jump sharply in both directions in the first few minutes after a release like this, and the first move is not always the one that lasts. This is an educational view of the market, not advice to buy or sell anything.
If you want to see how you would handle an afternoon like this one, with a major data release, a bank sell-off and oil moving all at once, the free Samuel & Co Trading trader assessment is a good place to test your approach.
