- Profits at the six largest U.S. banks in the third quarter grew 19% from last year
- The Federal Reserve's balance sheet stands at $6.6 trillion
Top Three Market Headlines
Beige Book Indicates Subdued Economic Conditions: The Federal Reserve last week published its latest "Beige Book," a compilation of observations about the economy across the 12 U.S. Federal Reserve districts. According to the report, economic activity was little changed over the past two months, with three districts reporting growth, five signaling flat activity, and four noting contraction. Meanwhile, employment conditions were indicated as relatively muted, with multiple districts noting limited demand for labor and a growing number of employers enacting workforce cuts owing to weaker demand, economic uncertainty, and, in select cases, investment in artificial intelligence technologies.
Eventful Week for Bank Stocks: Last week was a tale of two halves for bank stocks. Large institutions kicked off the week on a positive note, as the six largest U.S. banks collectively reported a 19% rise in third quarter earnings versus last year, thanks to higher investment banking fees and healthy corporate and consumer spending. The Invesco KBW Bank ETF was up 4% on the week through Wednesday, but the enthusiasm was dampened on Thursday when a few regional banks reported loan losses at select borrowers, prompting concerns about the possibility of broader credit problems industrywide. The resulting sell-off whittled the ETF's weekly gain to less than 1%.
Powell Hints at Ending Quantitative Tightening: Last week at a meeting of the National Association for Business Economics, Federal Reserve Chair Jerome Powell reaffirmed the Fed's overall economic outlook as stable but also acknowledged the recent slowdown in the labor market. Although inflation remains slightly above the Fed's 2% target, broader inflationary pressures were ruled out. Notably, the Chairman suggested that the central bank's effort to reduce its $6.6 trillion balance sheet — referred to as quantitative tightening — may soon conclude, which would be another step toward easing monetary policy in addition to the Fed's recent interest rate cuts.