Bank Earnings Get Mixed Reviews, Meta Wants You to Pay for Smarter AI

Zaid Admani (0:00)

Public.com presents The Rundown, your daily market update in 10 minutes. My name is Zaid Admani, and today is Tuesday, October 13th. In today's episode, we'll take a look at why chip stocks are selling off right now. We'll also break down big bank earnings and tell you about Meta's plan to get you paying for a smarter AI assistant. Then stick around to the end of the show to find out why Tamagotchis are making a comeback. We've got a great show for you today.

Let's go.

The bull market turned four years old yesterday, but tech stocks weren't exactly in a party mood. The S&P 500 fell 0.06%, basically flat on the day, while the NASDAQ fell by 0.4%. Now the Dow did squeeze out a gain of 0.4%, but nobody cares about the Dow, so. Anyway, here's the thing about the market yesterday. Almost two thirds of the stocks in the S&P were in the green, and eight of the 11 sectors were in the green as well, but tech stocks dragged down the overall index. You know, one reason for the tech sell off yesterday, especially in memory stocks like Micron, was a potential competitive threat from the Chinese memory maker, CXMT. CXMT announced progress on a design that packs more memory into a smaller space. We actually covered this on yesterday's show, so go check that out if you missed it. On top of the CXMT news, Broadcom CEO came out yesterday and said that a lot of AI investors don't really understand what they're investing in, which is a wild thing to hear from a guy who sells AI chips. I think that contributed to the AI sell-off yesterday. With the AI trade running this hot, especially memory stocks, any negative headline can take some wind out of that trade. By the way, it looks like the sell-off in memory and chip stocks is continuing today. I'm seeing a lot of red in pre-market trading. But this does come back to something that we've talked about over the last few weeks, on how much of the broader market depends on a relatively small group of winners, particularly in AI. In fact, according to the Wall Street Journal, only one-third of the S&P 500 stocks were above their 500-day moving average as of Friday, even with the index near a record high. The analogy that comes to mind right now is that the stock market is kind of like a basketball team, where the star player keeps putting up huge numbers. But when the star player has an off night, it's going to be a bad day for the team. This is kind of like the Houston Rockets with James Harden back in the day. Just fell short in the playoffs every year. Earning season is going to be a big test for the overall market. The expectations are pretty high. Fact set says that analysts expect S&P 500 earnings to grow about 30% in Q3 compared to a year ago, which is absolutely insane. But over the last few quarters, earnings growth hasn't disappointed. So we'll see if that continues in Q3. We'll stay on top of everything, breaking it all down along with everything else happening in the market. So definitely get subscribed to the podcast if you haven't already and tune in every day to stay in the loop.

Let's run through some headlines. We're starting with big bank earnings. JPMorgan, Goldman Sachs, Citigroup and Wells Fargo all reported earnings this morning. And the overall results were pretty mixed. Let's start with JPMorgan first. The bright spot here was stock trading, which was up 49% in the quarter to almost $5 billion. That is the company's third best stock trading quarter on record. But trading in bonds, currencies and commodities fell 4%, which was the first decline in more than two years. The expectation was for JPMorgan to make about $10.5 billion in total trading revenue. But because the soft in fixed income trading, the bank only made $10.3 billion. So that was a slight miss. And the weakness in fixed income trading can be traced back to rising interest rates because higher yields means declining values and existing debt. But despite the rare earnings miss, JPMorgan's shares are still up this morning as the bank expects to make $106.2 billion in net interest income this year, which is what the bank earns on loans minus what they pay on deposits. Now, moving on to Goldman Sachs, they beat expectations on top line and bottom line thanks to strong stock trading. Equity's revenue surged 72% from a year ago to nearly $6.5 billion, clearing estimates by about $1.4 billion. Goldman also got a boost from their dealmaking with investment banking fees jumping 21%. But just like with JPMorgan, fixed income was a soft spot, but not as weak as JPMorgan. Revenues there dropped about 1%.