Shares closed lower on Friday, with the Dow Jones Industrial Average down 1.3% to 29,634, the S&P 500 Index losing 2.4% to 3,583, and the Nasdaq Compound shedding 3.1% at 10,321.
Today’s decline saw major equity indices paring gains made in Thursday’s saw session and securing weekly losses for the Nasdaq (-3.1%) and S&P 500 (- 1.5%). The Dow, on the other hand, ended with a weekly gain of 1.2%.
Stocks started the day higher but turned south after the University of Michigan’s Consumer Sentiment Index edged up to 59.8 in October from 58.6 in September – continuing to rise from the all-time low near 50.0 from June.
“Consumer sentiment rose at the start of October as views on current conditions improved,” said Tim Quinlan, senior economist at Wells Fargo Securities. “Inflation expectations continue to be the key taker of this release, and while both short-term and long-term expectations have risen, it is important that long-term expectations remain at a level that the Fed will always consider as well anchored.”
Time to buy bank stocks?
Bank earnings were another area of focus for investors today. Large financial companies JPMorgan Chase (JPM (opens in a new tab)+1.7%), Citigroup (VS (opens in a new tab)+0.7%) and Wells Fargo (WFC (opens in a new tab)+1.9%) headlined this morning’s earnings calendar – marking the start of what is expected to be a dismal earnings season.
Earnings from three of the country’s largest banks far exceeded expectations, and stocks reacted accordingly.
In addition, JPMorgan CEO Jamie Dimon “made several comments regarding the bank’s ability to manage capital, expressing confidence that any negative impact on the macroeconomic environment, risk-weighted asset levels based on risk or AOCI can be easily managed by current capital levels and the earning capacity of the company,” says David Wagner, portfolio manager at Aptus Capital Advisors. “We have seen that underwriting standards were not not really eased earlier, so no ‘tightening’ is needed or done yet, which is an important part of this high quality bank.”
As for Citigroup, “lower cost of capital and net investment income are, in our view, the microcosm of the beat,” adds Wagner.
Given this strength on and off the charts, many investors may be wondering, is it time to buy battered bank stocks? Here we take a look at what analysts are saying about JPM, C and WFC.