Wednesday, October 15, 2014
Stocks appear on track to start today’s session deeply in the red despite a couple of positive earnings reports from the finance and technology sectors. Market participants are justifiably focused on the global economic growth backdrop that is pushing oil prices and bond yields lower.
The big litigation charge in the Bank of America (BAC) report this morning was a drag on the company’s Q3 results. But results beyond the charge came in modestly better than expected, with the improvement primarily coming from areas that we saw showing momentum in results from J.P. Morgan (JPM) and Citigroup (C). Trading revenues — particularly from the fixed income, currencies and commodities markets — were up 11% from the same period last year, while equities revenues were up 5.9%. Results from the bank’s core business aren’t materially different from those of its peers. In the current low interest rate and low loan demand environment, the core banking business is doing good enough – not great, but not bad either.
Earnings aren’t driving the market today – the downbeat mood at the open today is despite the positive Bank of America report this morning and the strong Intel (INTC) read Tuesday evening. Granted, this morning’s September Retail Sales and Empire State regional manufacturing survey were on the weak side, but futures were indicating a weak open even before these economic releases.
The driver of the market slide is beyond U.S. economic data and earnings reports – it is the all-pervading global fears that have been showing up in the sliding oil prices and government bond yields. No one saw oil prices dropping to $80 a barrel and 10-year treasury yields moving towards 2% instead of the other way around – I certainly didn’t it coming despite my overall bearish bent. Ebola-centric headlines aren’t helping matters either, but the main concern remains the uncertain global growth outlook.
Sheraz Mian
Director of Research
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