Market commentary: big banks open earnings season Tuesday

NEW YORK — The third-quarter earnings season begins Tuesday with the country’s largest banks, and the group arrives in an unusual position: financial stocks rose on Monday as the Dow gained, yet the sector remains well below its summer high. This market commentary looks at what investors are weighing.

The schedule

JPMorgan Chase, Goldman Sachs, Citigroup and Wells Fargo report Tuesday, October 13, according to both Yahoo Finance and Benzinga. Bank of America and Morgan Stanley follow on Wednesday, Benzinga said.

Yahoo Finance reported that analysts expect solid year-over-year results, though third-quarter reports may fall short of the strong second quarter. It cited Bloomberg Intelligence figures projecting S&P 500 third-quarter profit growth of about 25% from a year earlier.

A sector under pressure

Bank shares have been weak even though interest rates have risen. Yahoo Finance said the KBW Nasdaq Bank Index was down more than 14% from its August peak, with Goldman Sachs and Bank of America each down roughly 12% to 13% over the past month. Monday brought a modest bounce: financials rose ahead of the reports, and Benzinga’s midday data showed regional banks up about 1.0% and the financials sector fund up about 0.7%.

The rate backdrop

The Federal Reserve raised the federal funds target range to 3.75% to 4% on September 16, and the minutes released since then say most participants expected another increase would likely be appropriate by year end. For banks, higher policy rates can lift the income earned on loans and reserves, but they can also raise funding costs and pressure credit quality. Managements’ comments on loan demand, deposit costs and credit losses will therefore matter as much as the headline profit figures.

The Fed’s stated concern is inflation, which makes Wednesday’s September consumer price index report a second event for the sector. Because the figure lands the same day as the second group of bank earnings, it will shape how those results are received.

What it means for the broader market

Financials are one of the sectors that gained when technology slipped on Monday, so bank results will test whether the rotation can hold. Strong numbers would support the case that earnings growth is broadening beyond AI-related stocks. A disappointing round could undercut one of the few areas investors have turned to.

What to watch

On Tuesday, look at net interest income guidance, commentary on consumer and corporate credit, and trading and investment banking revenue. On Wednesday, the September CPI report arrives the same day Bank of America and Morgan Stanley report.