Last Week
Following the prior Friday’s sharp sell-off, markets bounced back on Monday after President Trump dialed back his 72-hour-old threat to impose an additional 100% tariff on China. However, the trade teeter-totter swung again on Tuesday, sending stocks lower after he floated new restrictions on Chinese cooking-oil imports.
Earnings season, with particular focus on the Financial sector, dominated the narrative for the rest of the week. It is the early innings, but thus far 86% of the companies that have reported have beaten expectations. During the past week, positive EPS surprises reported by companies from the big banks led to an increase in the overall earnings growth rate for the quarter to 8.5% from 7.9% the week earlier. Despite the positive earnings, several high-profile financial sector CEOs warned of emerging credit issues, with JPMorgan Chase CEO Jamie Dimon suggesting that there could be credit risks lurking in the economy, saying that “when you see one cockroach there are probably more.” The disclosure of bad loans by Zions Bancorporation and Western Alliance Bancorporation reinforced those concerns. Nevertheless, 22 of 25 Financial companies have reported earnings that beat estimates.
There was no sign of progress in resolving the government shutdown during the week. The market does not seem to care as the S&P 500 gained 1.7%, the Nasdaq Composite jumped 2.1%, and the Russell 2000 tacked on 2.4%. Advancing issues outnumbered declining issues by a factor of 1.8-1, with every sector finishing in the green. The bond market also rallied, with the yield on the 10-year Treasury slipping 5 basis points to 4.01%, which has touched its lowest level since October 2024. Once again, Gold was topping the leaderboard, spiking over $200 to $4,189/oz. The dollar drifted marginally lower.
On the Chicago sports Scene, North Star Team Member Eric Kuby, daughter Michelle, son-in-law David, and granddaughter Sweet Baby Jane, enjoyed a lovely afternoon at Soldier Field watching the Bears score their 4th win in a row, beating the Saints 26-14.
This Week
Earnings season will pick up steam with 90 S&P 500 companies reporting third quarter results including Coca-Cola, Netflix, and Tesla.
On Friday, the Bureau of Labor Statistics will release the consumer price index for September (assuming the agency’s one remaining employee shows up for work that day). Economists forecast a 3.1% year-over-year increase, as inflation remains sticky at around a 3% rate, 1% above the Fed’s aspirational rate of 2%. We still believe that the Fed will cut rates at their next meeting at the end of the month, unless there is a significant surprise to the upside in this report.
The rock band No Doubt is scheduled for an eight-night residence at the Sphere in Las Vegas. One of their big hits is “Don’t Speak,” but it is likely that we will hear more market-moving tariff-speak as the trade relationship between China and the U.S. continues to be regularly tweeted. Futures prices were in the green Monday morning as President Trump provided some details of U.S. demands, and negotiations were scheduled to resume.
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