Stocks started the day on solid footing as investors cheered the first round of big bank earnings. However, sentiment waned as the session wore on, with market participants spooked by a disappointing consumer sentiment reading and rising geopolitical tensions.
All three main benchmarks were in positive territory to start the day after several of the country's largest banks posted stronger-than-expected third-quarter results. JPMorgan Chase (JPM, +1.5%), for one, said earnings jumped 39% year-over-year to $4.33 per share, while revenue rose 21% to $40.7 billion.
Meanwhile, net interest income, which is a key measure of profitability for banks that shows the difference between revenue made on interest-bearing accounts like loans and the costs paid for deposits, surged 30% to $22.9 billion.
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Despite the well-received results, JPMorgan CEO Jamie Dimon said in the company's earnings release that "this may be the most dangerous time the world has seen in decades."
The executive pointed to tight labor markets and "extremely high government debt levels" that could keep both inflation and interest rates higher for longer. Dimon also warned of the "far-reaching impacts" from the war in Ukraine and attacks on Israel.
Consumer confidence drops as inflation expectations rise
The major indexes found themselves in negative territory by lunchtime after the University of Michigan said its consumer confidence index fell to 63.0 in October from September's reading of 68.1. Notably, the data showed year-ahead inflation expectations jumped to 3.8% from last month's 3.2% – the highest level since May – while long-term inflation expectations rose to 3.0% from 2.8%.
Market participants also worried about rising tensions in the Middle East after Israel on Friday called for the mass evacuation of 1.1 million civilians in northern Gaza. United Nations spokesman Stéphane Dujarric said the organization considers such an act "impossible," and one that cannot occur "without devastating humanitarian consequences."
Energy stocks outperform as oil prices spike
The geopolitical turmoil had an outsized effect on U.S. crude futures Friday, which soared 5.8% to settle at $87.69 per barrel. Not surprisingly, energy stocks (+2.2%) outperformed today, with APA Corp (APA, +5.2%), EOG Resources (EOG, +3.8%) and Marathon Oil (MRO, +4.7%) among the biggest gainers.
As for the major indexes, the Nasdaq Composite (-1.2% at 13,407) and the S&P 500 (-0.5% at 4,327) both finished lower on the day. The Dow Jones Industrial Average, on the other hand, ended with a 0.1% gain to 33,670 thanks to stronger-than-expected Q3 earnings from UnitedHealth Group (UNH, +2.6%). At nearly $540 a share, UNH has the greatest influence of all 30 stocks in the price-weighted Dow.
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