October 17, 2023

TLDR

MARKET RECAP → Stocks closed mixed Tuesday as the day kicked off with strong corporate earnings followed by a hotter-than-expected September retail sales report that kept those gains in check and pushed Treasury yields higher.

BANKS’ EARNINGS SURGE → ? Goldman Sachs (GS) and Bank of America (BAC) reported strong Q3 earnings, but BofA’s rate-sensitive strategy during Covid impacted its stock performance in 2023.

CHIPS & DIPS → ? The U.S. tightened export controls on advanced chips to China, causing Nvidia’s (NVDA) stock to dip nearly 5%, echoing broader tech industry concerns.

Sean Horgan

Head of Investor Relations @ MoneyLion

$shorgan

Today’s S&P 500 Heatmap

Source: finviz.com

Today’s Top News

BANKS’ EARNINGS SURGE

? Goldman’s Golden Quarter: Goldman Sachs (GS) reported Q3 earnings of $5.47 per share, surpassing the expected $5.31. With revenue of $11.82 billion, the bank saw a 33% drop in profit to $2.058 billion. Bond trading revenue decreased by 6% to $3.38 billion, but equities trading revenue rose by 8% to $2.96 billion. Despite challenges, CEO David Solomon remained optimistic about the bank’s future.

? BofA Beats Estimates: Bank of America’s (BAC) Q3 earnings stood at 90 cents per share, topping the anticipated 82 cents. The bank’s profit rose by 10% to $7.8 billion, with revenue growth of 2.9% to $25.32 billion. Interest income climbed by 4% to $14.4 billion, driven by higher rates and loan growth. Despite being poised to benefit from higher interest rates, the bank’s stock performance lagged behind its peers in 2023.

? Rate Sensitivity: Bank of America’s strategy during the COVID-19 pandemic led to an accumulation of low-yielding, long-dated securities. These securities depreciated as interest rates rose, making the bank more susceptible to the recent spike in the 10-year Treasury yield. This impacted the bank’s net interest income, a crucial metric for analysts.

Source: shutterstock

CHIPS & DIPS

? Export Restrictions Tighten: The U.S. Commerce Department broadened its export controls to prevent China from acquiring advanced computer chips and their manufacturing equipment. This move, a year after initial controls, aimed to counter the chips’ use in military applications, such as hypersonic missiles and AI. Commerce Secretary Gina Raimondo emphasized the controls’ intent to safeguard technologies with national security or human rights implications.

? Nvidia’s Nosedive: Nvidia’s (NVDA) stock took a hit, leading to a downward trend among chip stocks in response to the new U.S.-China export rules. The tightened regulations on AI technologies sent chip stocks spiraling in the early trading session.

? Broader Impact: The export control revisions have broader implications for the tech industry, especially companies involved in chip manufacturing and AI technologies. The move reflects growing U.S. concerns about technological advancements being used for military purposes by foreign nations.