Bank of America’s shares spike on strong results

Today’s headlines

What’s happening: Shares of Bank of America gained on Tuesday, after the bank released earnings for its third quarter.

What happened: The second-largest US lender reported upbeat earnings for the latest quarter.

However, Bank of America still recorded a decline in the net income for some of its major segments.

How were the results: The Charlotte, North Carolina-based bank reported 10% year-over-year growth in net income for the third quarter.

• Revenues rose 3% year-over-year to $25.32 billion, topping the consensus estimates of $25.14 billion.
• Earnings came in at 90 cents per share, up from 81 cents per share in the year-earlier quarter and topped Wall Street expectations of 81 cents per share.

Why it matters: Bank of America continued to benefit from the US Federal Reserve’s interest-rate hikes and market volatility. The bank’s fixed-income and equity traders topped market estimates, as stock trading revenues climbed 10% to a record of $1.7 billion.

Its NII (net interest income) also increased 4.5% to $14.4 billion, compared to expectations of 2.5% growth, driven by higher rates and loan growth.

Last week, big banks like JPMorgan Chase, Citigroup and Wells Fargo also reported upbeat earnings for the latest quarter.

The net income for Bank of America’s Consumer Banking segment fell 7% year-over-year to $2.9 billion, while that for Global Wealth and Investment Management declined 13% to $1.0 billion last quarter. However, Global Banking’s net income surged 26% to $2.6 billion and that of Global Markets rose 17% to $1.2 billion.

The bank said provision for credit losses had increased to $1.2 billion in the third quarter, from $0.9 billion in the year-ago quarter.

How shares responded: Bank of America’s shares gained 2.3% to close at $27.62 on Tuesday, following the release of quarterly results. The stock has lost around 18% year-to-date.

What to watch: Investors will watch the Fed’s upcoming interest rate moves as well as the state of the overall global economy.

The markets today

The British pound will be in focus today ahead of a basket of economic reports

Context: The GBP/USD forex pair moved lower on Tuesday as investors digested recent economic reports.

Details: The British currency came under pressure on Tuesday after data showed growth in workers’ regular pay easing from record levels and a decline in job vacancies, which raised prospects of the Bank of England keeping interest rates unchanged.

Average earnings growth, including bonuses, eased to 8.1% in August, from a two-year high level of 8.5% recorded in the prior month. The figure also came in lower than market estimates of 8.3%.

The number of job vacancies fell to 988,000 in the third quarter, a decline of 43,000 from the prior period. This marked the 15th straight quarter of decline. The number of employees on payrolls also fell by 11,000 to 30.1 million in September.

Some strength in the US dollar also exerted pressure on the sterling. The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose slightly to 106.25 on Tuesday.

The GBP/USD forex pair fell around 0.3% to $1.2184 on Tuesday. London’s FTSE 100 settled higher by 0.58% at 7,675.21, outperforming other European indices.

What to watch: Investors await the release of economic data on consumer price inflation and producer price inflation from the UK today. Consumer price inflation in the UK, which fell to 6.7% in August, is expected to decline further to 6.5% in September. Analysts expect factory gate prices of goods produced by manufacturers falling 0.2% in September, following a 0.2% increase in August.

Other Markets: US trading indices closed mixed on Tuesday, with the S&P 500 and Nasdaq 100 down by 0.01% and 0.33%, respectively, and the Dow Jones index up by 0.04%.

The news shaping the markets

Ukraine President Volodymyr Zelensky said the country used long-range missiles supplied by the US for the first time. Despite the ongoing tensions, the safe-haven US dollar index fell slightly this morning.

China’s economy expanded by 1.3% in the third quarter, surpassing market estimates of 1%, which lent support to the CNY/USD forex pair.

Australia’s Westpac-Melbourne Institute Leading Economic Index rose 0.1% in September versus an almost flat reading a month ago, sending the AUD/USD pair higher in forex trading this morning.

Brazil’s Industrial Entrepreneur Confidence Index declined by 1.4 points to a reading of 50.5 in October. However, the figure remained above 50 for the fifth month in a row and lent support to the BRL/USD forex pair.

The American Petroleum Institute said that US crude stockpiles had declined by 4.383 million barrels in the week ended October 13, versus an increase of 12.94 million barrels in the earlier week, which sent the WTI crude oil prices higher this morning.

What else to watch today

UK’s producer input prices, retail price index, South Africa’s inflation rate and retail sales, Eurozone’s inflation rate and construction output, Brazil’s retail sales, Canada’s housing starts, US Building permits, housing starts, crude oil stocks change, gasoline stocks change, distillate inventories, Fed Beige Book, net long-term tic flows, net purchases of US treasury bonds and notes, and net treasury international capital flows, Russia’s producer prices, China’s foreign direct investment, as well as Argentina’s leading economic index.