Published as of: October 11, 2024, 9:11 a.m. ET

(Friday market open) U.S. wholesale inflation slipped in September, easing investor worries after slightly warmer-than-expected consumer price data yesterday. Major indexes and Treasuries were subdued early today following the news, with eyes also on the latest round of bank earnings.

The September Producer Price Index (PPI) was flat, below expectations for a 0.1% increase and down from 0.2% in August, the government said. Lower energy prices were instrumental. The core PPI, which doesn't include food or energy, rose 0.2%, in line with consensus and down from 0.3% in August, showing signs of progress.

"Better news on the inflation front today, with the monthly PPI readings coming in below consensus expectations and below last month's numbers," said Collin Martin, director, fixed income strategy at the Schwab Center for Financial Research. "Treasury yields fell a bit following the release as this report runs a bit counter to yesterday's relatively strong Consumer Price Index (CPI) report. We've believed that the disinflationary trend remains intact, and this morning's PPI reports support that case."

Annual PPI was a little less refreshing than the monthly readings, with the headline rising 1.8% compared to the Bloomberg consensus estimate of a 1.6% increase and the core PPI rising by 2.8% compared to the consensus estimate of 2.6%. The readings for both headline and core PPI for August were upwardly revised as well.

Turning to earnings, JPMorgan Chase (JPM) appeared to impress, judging by a 1% rally ahead of the open. JPM easily beat analysts' consensus on earnings per share while revenue also topped average estimates, and investors appeared upbeat about the firm's new guidance.

The story wasn't all that different at its competitor, Wells Fargo (WFC), which also reported this morning and enjoyed a quick jump in shares despite a large drop in the closely watched net interest income category.

In premarket trading, futures based on the S&P 500^® index (SPX) is flat, and the Nasdaq-100^® (NDX) fell 0.2%. Futures based on the Dow Jones Industrial Average^® ($DJI) were flat.

• The 10-year U.S. Treasury yield (TNX) was steady at 4.1%.
• The U.S. Dollar Index ($DXY) rose to near two-month highs at 102.97.
• The Cboe Volatility Index^® (VIX) is steady at 20.85.
• WTI Crude Oil (/CL) dropped 0.6% to $75.36 per barrel.
• Bitcoin (BTC) climbed 2.9% to $61,291.

Breaking PPI into parts, services inflation climbed 0.2% in September while goods inflation fell 0.2%, mostly due to lower energy costs. In the services arena, furniture, apparel, and airline costs were among the metrics rising last month.

Investors might take note of annual core PPI rising from last month and exceeding expectations, but that should be seen in context. Annual readings from here on through the rest of the year face tough comparisons to a year ago when inflation was falling dramatically. That's why the annual gain might not get as much attention from investors.

Week ahead: Next Monday investors can try and catch their breath, with no major earnings or data on the table. Then the earnings race begins Tuesday with more big banks, health care, and airlines getting in on the action.

The week ahead is light for data, though housing starts and building permits loom next Friday. Tech earnings also don't begin in a big way until the following week, but Netflix (NFLX) kicks off earnings for next Thursday for streaming firms. Other big companies expected to report include United Airlines (UAL), Bank of America (BAC), Johnson & Johnson (JNJ), and American Express (AXP).

Stay alert early Monday for any unusual action in Asian markets that might spill into U.S. trading after China holds a press briefing Saturday that some analysts expect will feature a new economic stimulus announcement, this time perhaps on the fiscal side. Last month's stimulus was mainly monetary and might not light a fire under reluctant consumers. If stimulus is as high as some analysts think, Chinese markets might move on that first thing Monday. Stocks fell again in China earlier today and lost more than 3.5% this week.

Later this morning, investors receive the latest consumer sentiment reading from the University of Michigan. Its preliminary October report is expected to show a headline of 70.1, equal to September's final reading, Briefing.com said. Sentiment remains muted but above the depths of 2022, and last month's report showed expectations improving. Inflation expectations were 2.7% in the last report so check if that changed in early October.

Several Fed speakers take the mic today and could address this week's inflation data. Treasury yields are up sharply over the last three weeks but don't seem to be hurting stocks, possibly because investors are less worried about inflation. This suggests Wall Street remains in a "good news is good news" environment where positive economic data receive a positive response from the market.

Yields keyed off economic data, not inflation data, an important distinction versus two years ago when yields soared on inflation concerns. The one hiccup from Treasuries happened earlier this week, when Wall Street appeared spooked as the 10-year note yield eclipsed 4%. The pain wore off quickly.

JPMorgan Chase delivered better-than-expected net interest income (NII) of $23.4 billion in the third quarter and also raised its NII guidance slightly for 2024. This appeared to relieve investors, who sold the stock heavily last month after leadership said Wall Street's estimates for net interest income next year were too high. NII measures the money banks make lending minus what they pay to customers.

Treasury yields were falling fast a month ago when JPM delivered that guidance but have recovered nearly half of their losses since then, perhaps a boost for JPM and other banks. Other highlights of JPM's earnings today included higher provisions for possible credit losses, a rise in loans, and solid debit and credit card sales volume.

JPM CEO Jamie Dimon, an influential voice on Wall Street, warned in the company's press release that the geopolitical situation is "treacherous and getting worse." He added that U.S. inflation is slowing and the economy remains "resilient" but he has numerous concerns. In the firm's conference call, Dimon said the mergers and acquisitions and regulatory environments remain uncertain.

Wells Fargo shares popped 3% in pre-market trading after the company easily beat analysts' consensus for EPS and reported revenues that met expectations. However, net interest income fell 11% in the quarter as customers migrated to higher yielding deposit products, the company said. It guided for net interest income in the fourth quarter to be similar to the third quarter.

Overall, third quarter earnings are expected to rise about 4.2%, according to research firm FactSet, down moderately from last quarter. Analysts have lowered their expectations based on relatively cloudy outlooks companies shared last quarter, but earnings are seen bouncing back in the fourth quarter. Guidance, however, could have a large impact on fourth quarter and 2025 expectations.

Stocks on the move:

• Tesla (TSLA) plunged 6% in pre-market trading following its "Robotaxi" event last night. The autonomous vehicle will cost less than $30,000 and has no steering wheels or pedals, Tesla said. The vehicles will be made in high volume before 2027, MarketWatch reported. The descent in shares came as analysts called the event too light on detail.
• Uber (UBER) and Lyft (LYFT) both gained early today after the Tesla event, with Uber up 5% and Lyft up 2%. These two companies would likely face competition from the Robotaxi, but the event seemed to cool worries that Tesla's autonomous driving is around the corner. Uber is working with Alphabet (GOOGL) to introduce autonomous ride hailing.
• Ferrari (RACE) shares accelerated nearly 2% ahead of the open after an upgrade from JPMorgan Chase to overweight from neutral. The analyst is excited about the coming battery electric vehicle.

Thursday in review: Treasury yields hit new two-month highs and clipped major U.S. indexes Thursday after Wednesday's record finish. A surge in weekly jobless claims also startled market participants, but both the CPI and jobless reports had silver linings and losses weren't dramatic. Even so, investors fled longer-term Treasuries again and yields popped to new two-month highs. 

Elections and volatility: Uncertainty and opportunity go along with elections for options traders. Understanding historical market volatility surrounding elections can provide valuable trading insight. The market's behavior during the last two presidential elections revealed a notable rise in volatility, particularly in the six months leading up to Election Day.

Early today, futures traders built in an 88% chance rates will fall 25 basis points at the Federal Open Market Committee (FOMC) meeting on November 6–7, based on the CME FedWatch Tool. There's a 12% chance of no cut at that meeting.

Ideas to mull as you trade or invest

Election jitters… Market volatility is on the rise and futures trading indicates more on the way as the month continues and the U.S. election approaches in just over three weeks. The VIX futures complex now bakes in VIX staying above 20 the rest of this month and remaining elevated into November. It's not so much November 5 that's keeping the market on edge. It's what might come after. "One of the most common concerns I’m hearing from investors is worries about how long it might take after November 5 to determine a winner—and how that uncertainty, and potential legal disputes, could spark market volatility," said Michael Townsend, managing director, legislative and regulatory affairs at Schwab. "I agree that is a concern—markets don’t care much about the outcome of the election, but markets care a lot that there is an outcome. An extended period of uncertainty after Election Day is, to me, a bigger risk to the markets than the race affecting the markets before Election Day."

How's your credit? Today's debut of big bank earnings coincides with investment grade credit spreads reaching their lowest level since September 2021. In fact, if you go back to before the June 2021 low, they're back to where they were in February 2007. Spreads this tight could indicate that lenders are relatively sanguine about corporate credit, indicating that corporations are in relatively healthy financial shape as third quarter earnings season begins. It might be interesting to hear what bank executives say starting today about corporate and consumer credit. On the consumer side, credit card and auto loan delinquencies rose earlier this year, with credit card delinquencies hitting a nearly 12-year high in the first quarter, according to the Philadelphia Federal Reserve.

Why rate cut odds climbed: Despite a relatively warm CPI yesterday, futures market odds increased for a 25-basis point November rate cut. This could reflect rising jobless claims or some of the positive nuggets in CPI itself, such as signs of housing price growth slowing. Also, some investors might partially discount CPI's importance because the Fed's favored inflation report is the Personal Consumption Expenditures (PCE) price index, due later this month. That measure has trended below CPI, in part because it's less weighted toward shelter.

October 14: No major economic earnings or data scheduled.

October 15: Expected earnings from Bank of America (BAC), Citigroup (C), Goldman Sachs (GS), Johnson & Johnson (JNJ), PNC (PNC), UnitedHealth (UNH), Walgreens Boots Alliance (WBA), J.B. Hunt (JBHT), and United Airlines (UAL).

October 16: Expected earnings from Abbott Labs (ABT), Morgan Stanley (MS), U.S. Bancorp (USB), Alcoa (AA), and CSX (CSX).

October 17: September retail sales, September capacity utilization, September industrial production, and expected earnings from Marsh & McLennan (MMC), Travelers (TRV), Netflix (NFLX), M&T Bank (MTB).

October 18: September housing starts, September building permits, and expected earnings from Fifth Third (FITB), Procter & Gamble (PG), Regions Financial (RF), SLB (SLB), and American Express (AXP).