Futures Edge Up Before CPI; Bank of America Fined, Morgan Stanley Beats

Good morning. This is Trade and Ticker. Wednesday, October fourteenth, twenty twenty-six. Before the opening bell — the overnight story and today's catalysts, in plain English.

Daily Catalysts. Four things to watch today. First, the September consumer price index, the biggest inflation test of the week, out at eight-thirty Eastern. Second, round two of bank earnings, with Bank of America hit by a big federal penalty and Morgan Stanley posting a beat. Third, the money managers, where BlackRock is higher and State Street is falling hard. Fourth, oil, which is climbing again after more attacks on ships near the Strait of Hormuz. We'll get into each of these as we go.

Let's start with U.S. futures. The board is modestly higher heading into the open, with the Dow out front. As of about eight Eastern, Dow futures are up about a quarter of a percent, or roughly one hundred twenty points. S-and-P futures are up about a tenth of a percent. Nasdaq futures are slightly lower, down a little more than a tenth of a percent. The Dow is leading, and tech is waiting on the inflation number.

That follows a quiet-looking Tuesday that hid a lot of churn. The S-and-P finished just about flat. The Nasdaq slipped about two-tenths of a percent, and the Dow fell about a third of a percent, pulled down by Johnson and Johnson and Caterpillar. The big banks all reported and their stocks fell anyway, with Citigroup down more than five percent.

Oil is moving back up. Brent crude is around one hundred six dollars and thirty cents a barrel, up a bit more than half a percent and recovering most of Tuesday's drop. U.S. crude is up almost two percent, near ninety-six dollars. Two more vessels were attacked in the Strait of Hormuz, and Iranian officials told Reuters they are using new tactics to target ships. That keeps the supply risk front and center. The ten-year Treasury yield is a touch lower this morning, around five-point-one-nine percent, as bond markets get a little relief after weeks of selling.

In early trading, chip stocks are a little lower. Micron, A-M-D, and Intel are down about one percent, and Nvidia is down about half a percent. Dutch chip-equipment maker A-S-M-L reported sales that came in just a little shy of forecasts, with profit above expectations, and its U.S. shares are a touch lower. Albemarle is up more than three percent after Mizuho upgraded the lithium producer. Dell is down almost three percent and Hewlett Packard Enterprise is down about four percent after Barclays downgraded both, after huge runs this year. And Fastenal, the industrial supplies company, is down about five percent after its quarterly report.

Now let's get into those four things to watch.

First, inflation. The September consumer price index lands at eight-thirty Eastern. Economists expect a hot headline number, with prices up about six-tenths of a percent for the month and about three-point-six percent from a year ago, up from three-point-four in August. Most of that is gasoline, which jumped in September. The number the market really cares about is core inflation, which strips out food and energy. The forecast there is a gain of about two-tenths of a percent for the month. Traders see roughly a one-in-five chance the Fed raises rates again at its meeting on October twenty-seventh and twenty-eighth, and they see a hike by December as close to certain. A core reading of three-tenths or more would likely push those October odds up. New York Fed President John Williams said that the Fed may need to raise rates once more this year, but he sees no need for hikes in twenty twenty-seven. This is also one of the last big price reports before the November third midterm elections.

Second, the banks. Bank of America's profit fell about seventeen percent from a year ago, to six-point-nine billion dollars, or ninety-one cents a share. That includes a one-point-two billion dollar charge after the Treasury Department announced penalties of more than one-point-two billion dollars for anti-money-laundering and sanctions violations. Treasury said the bank failed to report more than five billion dollars in suspicious transactions. Without that charge, Bank of America earned one dollar and eight cents a share, close to what analysts expected. Revenue rose about three percent to thirty billion dollars, and net interest income, the money it makes on loans and deposits, rose eight percent. But investment banking fees fell eleven percent and trading revenue slipped. The stock is down about four and a half percent in early trading.

Morgan Stanley is the cleaner story. Revenue rose twelve percent to about twenty-point-three billion dollars, and earnings came in at three dollars and three cents a share, up from two dollars and eighty cents a year ago. That beat forecasts. Stock trading revenue jumped forty-one percent, and the wealth management business had record revenue and pulled in about two hundred thirty-two billion dollars in net new assets. Fixed income trading fell seven percent, and investment banking was only up about two percent, which was weaker than analysts hoped. The stock is roughly flat to a little lower in early trading.

Third, the money managers. BlackRock is up about three percent before the bell. Adjusted earnings of fifteen dollars and ninety-three cents a share came in well above forecasts, and assets under management reached about fifteen-point-five trillion dollars, up from about thirteen-point-five trillion a year ago. State Street is going the other way, down sharply in early trading. Its profit rose about twenty-seven percent and earnings of three dollars and sixty-nine cents a share topped forecasts, but total revenue of about four billion dollars came in a little light. Progressive also reported this morning and is little changed.

Fourth, oil and the Middle East. Brent is back above one hundred six dollars. Ships near the Strait of Hormuz keep getting hit, and the conflict around the Gulf is not cooling off. Energy stocks were the best group in the S-and-P yesterday, and higher oil is a big reason the inflation number this morning is expected to run hot. This afternoon, the Fed releases its Beige Book, a survey of business conditions around the country, and Richmond Fed President Tom Barkin is among the Fed officials speaking.

Here's what could turn this open lower. Watch three things. First, a core inflation number of three-tenths of a percent or more, which would push yields back up and hit tech the hardest. Second, if the selling in bank stocks spreads, after JPMorgan, Goldman Sachs, Citigroup, and Wells Fargo all fell yesterday despite solid numbers. Third, if Brent breaks higher on another attack near Hormuz and drags the rate story with it.

So here's the picture heading into the open. Dow and S-and-P futures are a little higher, and Nasdaq futures are a little lower. Inflation is the event of the day. Banks are split, with Bank of America under pressure from its penalty and Morgan Stanley holding up. BlackRock is higher and State Street is lower. And oil is climbing again.

Quickly overseas. Tokyo and Hong Kong finished about flat, and Europe is up about half a percent as tech shares steady.

We'll be back at lunch with how the market is trading that inflation number and what still matters into the afternoon. Thanks for listening. I'm Trade and Ticker.