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Stocks Continue to Make Headway as Budget Deal Looms

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Stocks Continue to Make Headway as Budget Deal Looms

During the week market participants experienced a rollercoaster ride which began with continued selling of riskier assets as the US government shutdown continued. On Thursday, the US equity markets generated the second largest rally of the year on the heels of a potential deal, that was eventually rejected, but shows that the sides are moving in the direction of opening the US government and discussing a debt ceiling bill that would allow the US to avoid a default. A weekend deal would generate additional upside interest and likely erode current high levels of implied volatility.

In Europe, Recent data from the UK shows that the economy has slowed in the third quarter, which acted as a drag on the US markets. The UK construction report was softer than expected. Construction output fell 0.1% in August. The consensus was for a 0.8% increase. Some of the disappointment may have been mitigated by the upward revision in July to 2.8% from 2.2%.

In corporate news, JP Morgan (NYSE:JPM) was the first out of the gates, reporting better than expected third quarter earnings. Excluding the onetime costs, JPMorgan’s earnings were $5.8 billion, or $1.42 a share, which beat analysts’ expectations of $4.65 billion, or $1.21 a share. JP Morgan began the Friday trading session in the black, continuing the prior days rally.

Revenue was $23.9 billion, compared with $25.9 billion in the period a year earlier. Analysts had estimated revenue of $24.06 billion.

Wells Fargo (NYSE:WFC) release earnings following JPM. Wells Fargo posted earnings per share of 99 cents per share. Third quarter revenue came in at $20.5 billion. Analysts expected the bank to report adjusted earnings per share of 97 cents on revenue of $21.02 billion. Wells was under pressure early in the trading session as forward guidance created headwinds for investors.

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