Stock futures struggle for direction as bank earnings come in mixed

Stock futures traded flat to slightly lower Wednesday morning, as a host of major banks released their quarterly results.

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Goldman Sachs (GS) on Wednesday reported third-quarter results that well exceeded consensus estimates, as investment banking and fixed income trading revenue each grew over last year and topped expectations. The trading boost Goldman Sachs and other banks including JPMorgan Chase and Citigroup but it did not extend to Bank of America (BAC), which posted lighter-than-expected trading revenue from stocks and bonds, and a miss on overall revenue compared to estimates. Bank of America also built its credit reserves during the quarter, adding more padding in case of potential customer loan defaults amid the pandemic.

Meanwhile, lackluster prospects for more stimulus and concerns over the timeline for developing a COVID-19 vaccine and treatment weighed on investors. Each of the S&P 500, Dow and Nasdaq declined for the first time in five sessions as of Tuesday’s close.

An impasse among U.S. lawmakers in Washington has kept hopes running low that more virus relief aid will come to fruition before the November election. Senate Majority Leader Mitch McConnell said Tuesday he will have the Senate take up relief legislation after the chamber’s return on Monday, with his narrower proposal set to include funds chiefly targeted to the Paycheck Protection Program. House Speaker Nancy Pelosi, however, has rejected slimmed-down stimulus proposals and deemed them inadequate, and even President Donald Trump said on Tuesday on Twitter to “Go big or go home!!!” for more stimulus.

Meanwhile, a pair of front-runners in the race to develop a COVID-19 vaccine and treatment announced that their respective trials were put on pause over safety concerns. Eli Lilly (LLY) said Tuesday afternoon that enrollment for its COVID-19 treatment would be temporarily halted, less then a day after Johnson & Johnson (JNJ) said clinical trials for its COVID-19 vaccine candidate were paused due to an unexplained illness in a participant. Shares of Eli Lilly and Johnson & Johnson were little changed overnight after dropping during Tuesday’s session..

7:35 a.m. ET: Goldman Sachs shares jump as investment banking, fixed-income trading fuel estimates-topping results

Shares of Goldman Sachs (GS) rose in early trading after the bank posted third-quarter sales and profit that were stronger than expected.

Earnings of $9.68 per share were much better than the $5.53 expected, and net revenue of $10.78 billion was also ahead of the $9.40 billion consensus. These results came as fixed-income net revenues surged 49% over last year to $2.5 billion, and investment banking revenue increased 7% to $1.97 billion, with both measures topping expectations. Equity trading sales, however, were slightly lighter than the $2.14 billion expected, with Goldman Sachs reporting $2.05 billion in this division.

7:25 a.m. ET: Stock futures struggle for direction

Here were the main moves in markets, as of 7:25 a.m. ET:

  • S&P 500 futures (ES=F): 3,501.75, down 3 points or 0.09%

  • Dow futures (YM=F): 28,592.00, up 7 points or 0.02%

  • Nasdaq futures (NQ=F): 12,104.00, up 10 points or 0.08%

  • Crude (CL=F): -$0.19 (-0.47%) to $40.01 a barrel

  • Gold (GC=F): +$9.50 (+0.5%) to $1,904.10 per ounce

  • 10-year Treasury (^TNX): -1 bps to yield 0.717%

7:17 a.m. ET Wednesday: Bank of America shares fall after trading revenue disappoints

Bank of America on Wednesday reported quarterly revenue that missed consensus estimates, with revenue net of interest expense falling 11% to $20.3 billion versus the $20.84 billion analysts had expected, according to Bloomberg data. Trading revenue from fixed income and equities totaled $3.3 billion, also short of the $3.5 billion expected.

Bank of America also built up its reserves to protect against customer loan defaults, with its allowance for credit losses increasing 2% from the prior quarter to $21.5 billion, with a net reserve build of $417 million/

6:05 p.m. ET Tuesday: Stock futures hug the flat line in late trading

Here were the main moves in equity markets, as of 6:05 p.m. ET:

  • S&P 500 futures (ES=F): 3,504.00, down 0.75 points or 0.02%

  • Dow futures (YM=F): 28,587.00, up 2 points or 0.01%

  • Nasdaq futures (NQ=F): 12,090.75, up down 3.25 points or 0.03%

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NEW YORK, NEW YORK – OCTOBER 02: People walk by the New York Stock Exchange (NYSE) in lower Manhattan on October 02, 2020 in New York City. Stocks and markets around the world have fallen in morning trading as investors digest the overnight news that President Donald Trump has Covid-19. (Photo by Spencer Platt/Getty Images)

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