Market Volatility: Analyzing U.S. Stock Futures and Big Bank Earnings

Let's get to the big story breakdown.

US stock futures are lower this morning, and this does come after Monday's rebound and Friday's sell off.

Now a government shutdown and tariff uncertainties still hang in the balance.

Wall Street's big bank kicking off 3rd quarter earnings this week, offering a potential spark for a market drifting through a data vacuum.

Now Citigroup, Goldman Sachs, JPMorgan and Morgan Stanley have gained over 20% and between 20 to 40% year to today outperforming the S&P 500 in. by at least 9% points now this year, Global M&A surging past $1 trillion in deal volume with activity in IPO's corporate debt, syndicated lending also showing strong gains.

As we kick off this trading week, I'm joined by Michael Reinking, senior market strategist at the New York Stock Exchange.

Michael, good morning.

Thank you so much for joining me.

Good morning, Remy.

Thanks for having me back.

Well, we've seen volatility across the equity markets as well as other asset classes.

So here we are on the heels of the latest big. earnings.

What do you make of Futs today?

Yeah, so you know, look, we had a resurgence in volatility that kind of kicked up at the end of last week, kind of with the the escalation by China with with kind of escalating the rare earth export controls.

You had a response by the administration seemed like they were kind of walking that back a little bit over the weekend and then you had kind of another escalation in terms of the, you know, the shipping that you highlighted earlier.

Um, so you're seeing kind of that response in general when you get a volatility shock after a long period of very compressed volatility, right, so if you go back through the entirety of the 3rd quarter, we had the max drawdown intraday high to low was just over 3%.

So when you have a sustained period of time when you have that low volatility, you bring those. flows that we always like to talk about kind of very much back into the market and then you get that volatility shock like we got on Thursday.

There tend to be kind of aftershocks and a reverberation of that in the aftermath.

We're seeing one of those today, but if you looked at where, where kind of the S&P 500 traded, right, we had almost touched the 50 day moving average on Friday.

That would have been the.

The first time that we got within 0.5% of that.

That was like the first time going back through May right since we had reclaimed that and then we bounced yesterday but we couldn't clear that 20 day moving average right so that's like kind of the very short term that moving average that I kind of pay attention to, you know, to kind of give you a signal of things are kind of an all clear right? and we didn't clear that yesterday and now we're kind of gapping below kind of yesterday's lows and we look pretty susceptible here at the open.

Yeah, and Michael, almost on a daily basis we continue to hear about deals being made here.

So the big question is what does this mean for the big banks?

And of course as earnings season kick kicks off, we heard from some of the banks, but we get more earnings this week.

So what are you listening out for?

Yeah, so this is like the official start of earnings season this morning, right?

If you look at the bank numbers, they were pretty solid like across the board.

You're seeing.

Of a mixed response within the stocks, but nothing too outlandish, right? of the underlying metrics within that kind of are as expected, right?

We've seen some puts and takes on the trading but in general pretty strong, right?

The capital markets and investment banking activity is very strong, right?

And then you know this quarter there's a lot of attention being paid to kind of provisions and revisions and the provisioning and.

And kind of the like how much they're kind of putting aside to reserves, sorry, I was.

The reserves that they're right and you know that's on the back of a couple of bankruptcies that we've seen in the private sector over the last couple of weeks where we had Trico, which is a subprime auto lender we had First Brands, which is an auto parts company, right?

So you saw JPMorgan did take some reserves kind of related to Tricolor in kind of their announcement this morning, right?

So people are looking to If there are any big red signs, you know, red flags, the provisioning across the other banks wasn't particularly negative, right?

And if you look at the commentary from the management teams around, you know, the environment, you know, it was pretty sanguine in general, right, continuing to highlight kind of the resilience, you kind of spending by the consumer, but you know some kind of some kind of some caution you kind of with with the overarching backdrop, right?

The other thing to kind of pay attention.

To is we're in the midst of the government shutdown.

We're not getting that economic data, so we do want to pay close attention to what the kind of management teams are telling you about the current environment, you know what they're saying about headcount, you know, and what they're doing from that perspective and then also as we move away from the banking and into more kind of consumer facing and industrial companies, what they're doing with pricing and how that's going to impact you know kind of inflation on a go forward.

And we have less than 60 seconds here, Michael.

So as you mentioned, it is week 3 of the US government shutdown, so we're not getting the key data points that we usually get, but we are expected to get that CPI figure before month end.

And of course when we look at that rate cut expectations, we know that the October rate cut, 25 basis points is baked in the cake, but we are getting a lot of commentary.

So what are you listening out for?

Yeah, so I mean this afternoon right we do hear.

From Fed Chair Powell, right, that's going to be kind of an important moment just to hear how he's discussing, discussing the fact that we're not getting that economic data and if he gives us some more clear signals that we are going to get that rate cut, you know, kind of at the end of this month.

I mean, as we've talked about, you know, on air, right, I thought with the removal of that data that that cemented the idea that we would get a rate cut.

We've seen those probabilities moving up towards 100%, you know, pretty close to it, right, so.

We haven't seen that the Federal Reserve, you know, this Federal Reserve, want to really rock the boat and kind of do things that markets aren't fully priced for, so I would expect him to kind of bless that kind of as we as we move into this afternoon.

OK, Michael, well, a lot to look forward to this week.

So thank you so much for joining Amy and thank you for your insight.

Thanks for having me.