Stocks Tick Up After Goldman Earnings Soar, But Key Economic Indicator Shows Consumer Worries


Stocks barely budged Wednesday morning after a mixed bag of pre-market earnings results revealed that the economic recovery is still suffering from weak fundamentals.

Key Facts

As of 9:35 a.m., the Dow Jones Industrial Average had edged up .1%, while the S&P 500 and the tech-heavy Nasdaq ticked up .2% and .5%, respectively.

Shares of Goldman Sachs climbed 1% after the New York-based investment banking giant reported $3.5 billion in profits and a 30% surge in revenue fueled by the mid-pandemic trading boom. 

Bank of America, on the other hand, failed to impress investors, posting mixed results for the third quarter that beat analysts expectations on profits, which totaled $4.9 billion, but fell behind on revenue expectations; its shares are down nearly 3%.

Wells Fargo shares are down 3% after reporting a 56% drop in quarterly earnings due to decreased interest income in light of historically low interest rates, the firm said.

Global markets were also fairly tepid on Wednesday: As of market open, the United Kingdom’s FTSE 100 had fallen .4%, and France’s CAC 40 was virtually flat, while Japan’s Nikkei 225 ended Wednesday up just .1%.

The consumer price index for September–a key measure of inflation–came in slightly below expectations, rising .19% during the month and leading to an unchanged year-over-year rate of 1.7%.

Key Background

The Covid-19 pandemic threw the economy into a deep recession, and Federal Reserve Vice Chairman Richard Clarida said Wednesday morning that the U.S. economy needs another year–or maybe more–until it fully recovers. The recovery thus far has been marked by slowed job growth, layoffs that remain high and a volatile stock market that’s been rocked in recent weeks by mounting uncertainty around fiscal stimulus and the upcoming November election. The prior market high, in early September, was followed immediately by a decline of almost 10% as coronavirus cases once again surged domestically, noted Brad McMillan, the chief investment officer at $200 billion RIA Commonwealth Financial Network, on Tuesday.

Crucial Quote 

“Markets are now hoping for–and trading on–a smooth election, a big stimulus, the end of the pandemic and the economy being back to 2019 normal early next year. If all that happens, then current prices, based on interest rates staying low, appear supportable,” says McMillan, “Right now, it seems like some of the good news might not happen… While the economy continues to recover, more damage is pending as multiple industries are now facing deadlines to downsize and as more and more people exhaust their savings and earlier stimulus payments.”

What To Watch For

Earnings season continues Wednesday after the market close with a key report from United Airlines Holdings, which should shed some light on the extent of the coronavirus-dealt damage still being endured by the embattled airline industry. Morgan Stanley, Charles Schwab and Walgreens are slated for Thursday.

Further Reading

Goldman Sachs Posts $3.5 Billion Profit, Smashing Wall Street Expectations As Revenues Surge 30% Mid-Pandemic (Forbes)

Bank Of America Posts $4.9 Billion Profit, Down 16% From Last Year As Big Banks Look Towards Recovery (Forbes)

JPMorgan, Nation’s Largest Bank, Posts $9.4 Billion Profit–Shattering Wall Street Expectations Despite Pandemic (Forbes)

Citigroup Pulls In $3.2 Billion In Profit As Banks Beat Expectations (Forbes)

Cruise Stocks Are Sinking–Again–After Royal Caribbean Reveals It’s Raising A $1 Billion Lifeline (Forbes)

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