Dow shot up 432 although 200 below highs at the opening, advancers over decliners an impressive 8-1 & NAZ gained 295. The MLP index went up 2+ to 212 & the REIT index rebounded 12+ to the 352s. Junk bond funds rose along with stocks after recent selling & Treasuries were purchased, reducing yields (more below). Oil went up to the 86s & gold advanced 19 to 1668.
AMJ (Alerian MLP index tracking fund)
Bank of America (BAC) joined other big US banks in reporting a 9% drop in Q3 as it set aside funds to cover soured loans from a
potential deterioration in the US economy. The 2nd-largest
US bank added $378M to its loan-loss reserves as it braces for a
weakening economy. That compares with a release of $1.1B a year
earlier. The Federal Reserve 's aggressive monetary policy actions to tamp down inflation have sparked concerns that the economy could slip into a recession as interest rates rise. "Our
U.S. consumer clients remained resilient with strong, although slower
growing, spending levels and still maintained elevated deposit amounts,"
said CEO Brian Moynihan. The bank's consumer business reported a 12% jump in revenue, helped by higher balances and a rise in interest rates. EPS was 81¢,
beating the estimate of 77¢, driven by a
24% gain in net interest income. Net EPS applicable to common shareholders was 81¢, for the qtr ended Sep 30, compared with 85¢, a year earlier. The stock rose 1.53.
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Bank of America profit drops on loan-loss reserve build
Treasury yields fell as investors looked to earnings reports to assess the impact of persistent inflation & paid close attention to UK economic turmoil that has been weighing on global bond markets. The yield on the 10-year Treasury was at 3.92%, having fallen by 8 basis points after surpassing the 4% mark multiple times last week. Meanwhile, the yield on the policy-sensitive 2-year Treasury dipped by nearly 10 basis points to 4.409%. It had reached a 15-year high on Thurs. Yields & prices move in opposite directions & one basis point equals 0.01%. Investors are looking closely at earnings releases for hints on the impact that inflation & associated interest rate hikes are having on the US economy. After Sep's inflation reading was hotter than expected, analysts are widely expecting another 75 basis point rate hike from the Federal Reserve in Nov. Some fear that the hikes are too much too soon & could cause a recession. Meanwhile, the Treasury Dept is considering bond buybacks to improve market liquidity. Markets also kept a close eye on developments in the UK economy, as the newly appointed Finance Minister Jeremy Hunt said he would reveal his medium-term policy plans today. The yield on the UK 10-year gilt was last 4.037%, down by around 25 basis points.
Treasury yields decline as investors assess the impact of inflation on markets
UK Prime Minister Liz Truss is facing calls to resign from within her own Conservative Party just 6 weeks after entering Downing Street. Truss & her former Finance Minister Kwasi Kwarteng announced a fiscal package – a "mini-budget" – on Sep 23. The measures triggered market turmoil, from a plunging £ to pension panic & a rare public rebuke by the IMF. Piece by piece, the plans have been tweaked & trashed – including reversing plans to scrap an increase in corp tax, axing plans to abolish the top income tax bracket & shortening the energy guarantee, designed to subsidize consumer & business energy bills, from 2 years to just 6 months. The latest plans were announced today by Jeremy Hunt, just 3 days into his tenure as finance minister. He's the 4th person to fill the position since Jul. Truss sacked Hunt's predecessor on Fri & now lawmakers from across the political spectrum are calling for her to follow him out the door. Elected members of Truss' own party are openly calling for her to quit, while up to 100 members of the party are believed to have submitted letters of no confidence in the prime minister, according to report.
UK Prime Minister Liz Truss faces serious pressure to resign after failed budget
Important earnings are coming shortly & they will give signals about the strength in the economy. The inverted yield curve, short term yields are higher than longer term debt, a classic signal for a coming recession, continue in the Treasury market. And the chaos in the UK muss be watched as this could rock global markets.Dow Jones Industrials
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