Mixed Q3 Earnings for Major Banks

New Producer Price Index (PPI) numbers are out this morning for the month of September, and results were notably better than expected: +0.4% on the headline number, doubling the +0.2% expected. August’s initial +0.3% reported remained unchanged. This marks the highest level for monthly PPI since February, aka “pre-Covid levels.”

Both Goods and Services gained 0.4% last month, as compared to a more lopsided August, which brought +0.5% on Services and +0.1% in Goods. Stripping out food and energy costs (“core”), this matches the +0.4% headline — a sign of strengthening on the producer side of pricing. Recall yesterday’s Consumer Price Index (CPI) for September came in as expected on headline and core, +0.2%, which was half of what the August CPI numbers showed. So we’re seeing an incremental shift to the supply side of the equation over the past month or so.

Year over year, PPI reaches +0.4% in its final read, with ex-food and energy +1.2% over the past 12 months. this is also the highest read we’ve seen since February. Year over year core trade was +0.7%, also higher than expected. While these moves may seem incremental, they do illustrate some important undergirding of the U.S. economy. We look for this to continue as the months roll along.

Following solid Q3 earnings reports from JPMorgan Chase and Citigroup yesterday, Bank of America BAC has come up short in its Q3 release this morning: 51 cents per share missed the Zacks consensus by 2 cents, while revenues of $20.5 billion was 1.34% below estimates and beneath the $22.8 billion reported in the year-ago quarter. Shares are down 2% in Wednesday’s pre-market, pushing year-to-date stock value beneath -30%.

Wells Fargo WFC also missed on its bottom line, by 5 cents per share to 42 cents, though revenues in the quarter outperformed expectations to $18.86 billion from the $17.96 billion in the Zacks consensus. Credit loss decline was a big positive for the Zacks Rank #4 (Sell)-rated bank (prior to the earnings release; we look for rank changes upon analyst estimate adjustments), dropping from $9.5 billion in Q2 to $0.8 billion in Q3. That said, Wells has missed four straight quarters on its bottom line, seven out of the last 10 quarters. Shares are down 1.5% in early trading.

On the other side of things, Goldman Sachs GS posted a return to its old big-winning ways, blowing the doors off Q3 earnings — $9.68 per share versus $5.58 expected, a 73% positive surprise — on revenues of $10.78 billion, which outperformed the Zacks consensus by 17.3% and bettered the year-ago tally of $8.32 billion. Its provisions for credit losses also dropped notably, by $278 million in the quarter. Goldman shares are up 2% in today’s pre-market.

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