Strong bank earnings drive US markets higher

General market commentary

US equities ended a volatile session mostly higher on Wednesday, supported by strong earnings results from major banks. The Nasdaq Composite rose 0.7 percent to 22,670.1, while the S&P 500 gained 0.4 percent to 6,671.1. The Dow Jones Industrial Average finished just below the flatline at 46,253.3 after two consecutive days of gains. Among sectors, real estate led the gainers, while materials and industrials saw the biggest declines. Bank of America and Morgan Stanley advanced sharply after reporting better-than-expected third-quarter results, following similarly strong earnings from Citigroup, JPMorgan, Goldman Sachs and Wells Fargo earlier in the week.

Elsewhere, Hillenbrand shares surged 18 percent after agreeing to be acquired by Lone Star Funds. Broader sentiment was lifted by optimism over a potential October interest rate cut from the Federal Reserve, as Chair Jerome Powell signalled concern over rising labour market risks and hinted at an end to the Fed’s balance sheet runoff. The Fed’s Beige Book reinforced expectations of further policy easing after noting weaker demand and muted labour conditions across several districts. Despite the improving tone, investors remained wary amid persistent trade tensions between the United States and China, and continued political gridlock in Washington over government funding. Overall, the session reflected cautious optimism, with improving corporate earnings and expectations of monetary support helping offset ongoing macroeconomic and geopolitical uncertainty.

Latest market and economic update

Most Asian markets rose on Thursday, buoyed by expectations of imminent U.S. Federal Reserve rate cuts. South Korea’s KOSPI surged nearly 2%, Japan’s Nikkei 225 gained 1%, while India’s Nifty 50 futures inched higher. Chinese shares were subdued amid U.S.-China trade tensions, with the Shanghai Composite flat and Hong Kong’s Hang Seng down 0.1%. Singapore’s index fell 0.4%.

US equity futures were little changed, with S&P 500 at 6,714, Nasdaq 100 up 0.1 percent to 24,938.75, and Dow Jones 0.1 percent higher at 46,517. Strong bank earnings were offset by US-China trade tensions and the ongoing government shutdown, keeping markets cautious. After-hours, Salesforce rose 3.6 percent, while United Airlines fell 0.5 percent.

European equities rebounded on Wednesday, with the Stoxx 50 up nearly 1% and the Stoxx 600 over 0.5%. Luxury shares led gains, with LVMH up 12%, lifting Hermès, Moncler, Richemont, Kering, and Burberry. Tech shares rose, with ASML up 3.4% on strong earnings and AI-driven 2026 guidance. France’s CAC 40 climbed 2.2% on government stability and easing trade tensions.

The US dollar slipped on Thursday as Sino-US trade tensions and expected Fed rate cuts dampened demand. The euro rose 0.14 percent to $1.1664, while the dollar index fell 0.16 percent. Investors focused on trade developments, potential Trump-Xi talks, and signs of labour market weakness amid the ongoing government shutdown.

Oil prices rose sharply in early Asian trade on Thursday, supported by expectations of tighter supplies after President Trump said India would stop buying Russian oil. Brent rose 1.1% to $62.57 a barrel, WTI to $58.89. Gains offset earlier losses from US-China trade tensions, oversupply concerns, and weakening demand, while Fed rate cut bets lent further support.

The two-week US government shutdown may cost the economy up to $15 billion a week, a Treasury official clarified, correcting an earlier daily estimate by Secretary Bessent. He said the shutdown is slowing economic momentum despite a strong investment boom and noted the fiscal 2025 deficit fell slightly, with the deficit-to-GDP ratio potentially reaching 3 percent.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Salesforce expects revenue of over US$60 billion by 2030, excluding its planned Informatica acquisition, above analyst estimates of US$58.37 billion. The company forecast fiscal 2026 revenue of US$41.3 billion, driven by continued expansion of AI features across its software. Results come amid investor pressure to deliver returns on prior AI investments and weak corporate spending.

United Airlines forecast record quarterly revenue, expecting adjusted profit of $3.00–$3.50 per share for the December quarter, above analysts’ $2.86 estimate. Third-quarter profit was $2.78 per share. Revenue rose 2.6% to $15.2 billion, with premium and loyalty segments up 6% and 9%. The airline continues investing in lounges, fleet upgrades, and enhanced customer experience.

ASML expects a significant drop in sales to China in 2026, but CFO Roger Dassen said this is not due to previous stockpiling by Chinese customers. He explained that shipped systems are already installed in chip factories, ruling out stockpiling as a factor behind the projected decline, according to the company’s third-quarter earnings report.

Hillenbrand shares surged 18% after agreeing to be acquired by Lone Star Funds for $32 per share, valuing the company at around $3.8 billion. The deal, offering a 37% premium over the pre-deal price, was unanimously approved by Hillenbrand’s board. The company will become privately held upon completion, expected by Q1 2026.

Bouygues, Orange, and Iliad have jointly made a non-binding €17 billion offer for the majority of Altice France’s telecom assets, excluding XpFibre, UltraEdge, Intelcia, and other units. The bid values Altice France at roughly 6.6x EV/EBITDA. Bouygues would take 43%, Iliad 30%, and Orange 23%, with B2B and B2C operations and infrastructure divided among the consortium.

UBS expects the bull market to continue, supported by resilient consumer spending, ongoing AI investment, and potential Fed rate cuts. Analysts forecast around 10% S&P 500 EPS growth in 3Q, driven by healthy earnings beats. Strong AI adoption and cloud revenue growth, alongside durable earnings and favourable valuations, reinforce confidence that the bull market remains intact.

HSBC upgraded NVIDIA to Buy from Hold, raising its target price to $320, citing strong AI chip demand. The bank expects FY27 datacenter revenue of $351 billion, 36% above consensus, and EPS of $8.75. Rising GPU total addressable market, renewed CoWoS wafer allocations, and potential US-China trade recovery support continued earnings growth.

Raymond James analysts describe Amazon’s cloud unit, AWS, as a “show me” story despite AI enthusiasm. They forecast AWS growth of 17.7–18.9% through 2027, with generative AI contributing $17.5 billion by 2027, while noting mixed signals from multi-cloud adoption and limited uptake of Nova LLM. The firm maintains an Outperform rating with a $230 price target.

KB Securities rates Samsung Electronics as a Buy, citing structural earnings growth amid a persistent HBM and DRAM shortage through 2027. The brokerage raised its target price to 130,000 won and forecast 2026 operating profit of 64 trillion won, driven by AI data centre demand, DRAM yield improvements, and expanding HBM4 shipments, marking a shift to sustained growth.

Guggenheim initiated coverage of the delivery and ride-hailing sector with bullish views on Uber, DoorDash, and Lyft, while taking a cautious stance on Instacart. Uber was named the top pick with a Buy rating and $140 target, benefiting from scale and autonomous vehicle potential. DoorDash and Lyft also received Buy ratings, while Instacart was rated Neutral.

Kepler added Publicis to its French Top Picks list following the advertising group’s third guidance upgrade. The firm highlighted Publicis’s improved financial outlook, strong earnings momentum, and growth prospects, making it a key recommended equity in France, as part of a strategy that regularly updates selections based on company performance and market conditions.

Upcoming data and events

Key US economic data due today include the Philadelphia Fed Manufacturing Index, retail sales, the Producer Price Index, and EIA crude oil inventories, which will be closely watched for signals on inflation and demand. Among companies reporting earnings, TSMC and US Bancorp are in focus.

This information is provided solely for educational and informational purposes and should not be construed as investment advice, advice on specific investments or investment decisions, tax advice, legal advice, or any other form of professional or regulatory advice. The information does not take into account your personal circumstances and is provided to you on the express understanding that it does not constitute advice and should not be relied upon in making any investment decision. Investing in financial instruments involves risk. You should conduct your own research before making any investment decisions and seek the assistance of a licensed financial advisor if you are unsure. No person should act on any opinion or information contained in this document without first obtaining appropriate professional advice. Calamatta Cuschieri Investment Services Limited does not accept liability for any actions, proceedings, costs, demands, expenses, damages, or losses suffered as a result of reliance on the information herein.