Strong profits, cautious outlook
On Tuesday, the biggest names on Wall Street turned in yet another robust quarter, helped by American households keeping up with their bills and companies pouring money into artificial intelligence. JPMorgan Chase, Citigroup, Wells Fargo and Goldman Sachs each earned more than they had a year before, yet all four cautioned that elevated borrowing costs could weigh on the economy over time, and that stubbornly high prices might hurt consumers unless inflation is tamed.[S1]
JPMorgan's third-quarter profit came to $15.3 billion, equal to $5.57 per share, compared with $14.4 billion, or $5.07 per share, a year earlier. That fell short of the $5.93 per share analysts had projected, an unusual miss for the bank and its chief executive, Jamie Dimon, whose last such disappointment came almost three years ago. Weakness in fixed income trading, which slowed versus both last summer and the prior year, dragged on investment banking. Shares still gained 0.8% early in the session.[S1]
Goldman Sachs enjoyed a big jump in third-quarter earnings, driven largely by a surge in stock-trading revenue, though its bond trading also cooled during the period. Profit reached $5.29 billion, or $17.01 per share, versus $4.1 billion, or $12.25 per share, a year before, and the stock climbed 1.9%. Citigroup, meanwhile, said quarterly earnings rose 40% year over year, topping forecasts on stronger investment banking and wealth management revenue, while its credit card unit held steady. Citi shares slipped 0.7%.[S1]
Wells Fargo earned $5.95 billion, or $1.87 per share, surpassing what analysts had expected. The San Francisco lender's profits have been rising consistently over recent quarters, following the removal by federal regulators of the asset cap that had been in place for years after the sales practices scandal roughly a decade ago. Wells Fargo shares fell 1.5%.[S1]
Rate volatility and delayed investments
This summer brought heavy turbulence and swings in the bond market, with investors growing anxious over government borrowing and inflation. Yields on benchmark instruments such as 10-year and 30-year Treasurys climbed to multiyear highs. Rising costs for diesel, technology and food gave the Federal Reserve grounds to lift interest rates last month, even as the White House pressed it not to.[S1]
Elevated interest rates, combined with volatility tied to the election, have led some companies to hold off on major investments until late this year or early 2027. OpenAI, which owns ChatGPT, said it intends to push back its initial public offering to next year. That listing is seen as a potential windfall for Wall Street investment bankers, much like SpaceX's offering earlier this summer.[S2]
Even with the turbulence, bank chief executives said they still expect the economy to expand over the near to medium term. Goldman CEO David Solomon told investors on a call that climbing bond yields do not worry him. Other bank leaders, however, flagged a cooling housing market, with new mortgage rates sitting well above 7%. Wells Fargo, home to one of the country's biggest consumer banking operations, echoed that view, telling investors every part of its business is growing except mortgage originations.[S2]
