The new round of earnings season for US stocks has already begun, and this earnings season coincides with the adjustment of the Federal Reserve's monetary policy, making the economic signals it releases particularly eye-catching.

The financial reports of major companies not only provide investors with tools to assess corporate performance, but also provide an important reference for analysts and economists to interpret overall economic trends. At present, the data on the US economy shows complex signals, and there has been widespread discussion on how the country's economy will "land".

Financial and technology sectors exceed expectations

On October 11, US time, financial stocks first became the focus of the market, with Wall Street giants taking the lead in kicking off the earnings season, with earnings generally exceeding expectations.

The first financial reports released by JPMorgan Chase and Wells Fargo set a good start for the bank earnings season.

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JPMorgan Chase, the largest commercial bank in the United States, saw a substantial 31% increase in investment banking revenue in the third quarter, and net interest income also unexpectedly grew by 3%, driving both profits and revenue to exceed expectations.

Wells Fargo's net profit fell 11% to $5.1 billion in the third quarter, or $1.42 per share, but it was better than the analyst's expectation of $1.28. In addition, Wells Fargo's investment banking department's middle fee income grew by 37% to $672 million, boosted by which, non-interest income increased by 12% year-on-year to $8.7 billion.

The better-than-expected performance of these two banks also drove the KBW Bank Index, which tracks the 24 largest banks in the United States, to jump by more than 3% on the same day, breaking through the recent high point set before the outbreak of the regional banking crisis in the United States driven by the collapse of Silicon Valley Bank in February 2023, and setting the highest closing point since April 2022.

The following week, peer competitors Bank of America, Citigroup, Goldman Sachs, and Morgan Stanley also successively released their financial reports.

Bank of America's financial report showed that revenue increased slightly to $25.49 billion in the third quarter, exceeding the market expectation of $25.3 billion.Citigroup reported third-quarter revenue of $20.32 billion, a year-over-year increase of nearly 1%, exceeding analysts' expectations of $19.84 billion.

Goldman Sachs also posted impressive financial results, with third-quarter revenue of $12.7 billion, a 7% year-over-year increase, higher than the expected $11.8 billion; profit was $2.99 billion, a significant 45% increase year-over-year.

Morgan Stanley's third-quarter revenue was $15.38 billion, above the expected $14.35 billion, with its wealth management, trading, and investment banking revenues all exceeding expectations; pre-tax profit was $4.221 billion, a 34% year-over-year increase.

The Wall Street Journal reported that the financial reports of U.S. banks presented three major points of interest: consumers are still spending; consumers continue to borrow with credit cards, but the repayment speed is slowing down, indicating that some households are under pressure; bank customers continue to shift their deposits into products such as U.S. Treasury bonds and money market funds in search of higher yields. To attract deposits and retain savers, banks have to pay higher interest rates.

The Federal Reserve entered a monetary easing cycle in September, and Stephen Biggar, Director of Financial Services Research at Argus Research, believes that the Fed's interest rate reduction cycle is beneficial to the banking industry and other markets. "As banking industry analysts, we typically support higher interest rates because they are more favorable for net interest margins. But at a certain point, high interest rates have become somewhat unwelcome."

Biggar stated that lowering interest rates will help stimulate some loan growth, which has been very weak. This will help alleviate the pressure on deposit costs, which have also been rising for banks. In addition, it also helps increase the possibility of an "economic soft landing" and aids in loss provisions.

Outside of financial institutions, the financial reports of large technology companies often determine the success or failure of the U.S. stock market. As the first shot of the technology stocks in the reporting season, the streaming giant Netflix delivered an impressive third-quarter report card: revenue and profits both exceeded expectations with double-digit increases, operating profit margins accelerated, and the slowdown in subscriber growth was less than Wall Street expected. At the same time, Netflix's fourth-quarter revenue guidance was significantly stronger than expected, and it slightly raised its annual guidance for this year.

AI chip demand remains a major highlight, with TSMC's third-quarter performance strong, with sales, net profit, and gross margin all exceeding expectations.

The market is particularly looking forward to NVIDIA's performance announcement. The stock price of this chip giant rose by more than 16% last month and is currently expected to replace Apple as the most valuable publicly traded company.

Wall Street institutions also recently看好 Tesla's third-quarter performance. Based on global electric vehicle sales data for July and automotive registration/production data for Europe and China in August, Barclays analyst Dan Levy estimates that Tesla's third-quarter deliveries will be about 470,000 vehicles, higher than the market's general expectation of 461,000 vehicles.Estimated Growth Rate Decline

As the third-quarter financial reports begin, the U.S. stock market has ushered in the second anniversary of the bull market.

The S&P 500 Index set a new record high for the 45th time this year and also historically surpassed the 5,800-point mark for the first time.

Therefore, U.S. companies must ensure that they exceed expectations in their performance to maintain the current upward trend.

Before the earnings season, the forecast data from FactSet showed that the earnings growth rate of the S&P 500 Index constituents for the third quarter was 4.2%, which would be the fifth consecutive quarter of year-over-year growth. However, the current growth rate forecast has decreased from 7.8% at the beginning of July. At the same time, in terms of revenue expectations, analysts have also lowered their expectations for this quarter. The annualized sales growth rate of the S&P 500 Index constituent companies is expected to be 4.7%, while the expectation as of June 30 was 5.0%.

FactSet's forecast shows that among all 11 sectors, the Information Technology sector is expected to achieve the highest annualized earnings growth rate, reaching 15.2%. This sector includes well-known companies such as Google's parent company Alphabet, Facebook owner Meta Platforms, Netflix, Walt Disney, Verizon, and AT&T.

The healthcare industry is expected to rank second, with earnings per share (EPS) growing by 10.9% year-over-year.

The Communication Services sector is expected to report the third-highest annualized earnings growth rate, reaching 10.5%. Major companies in this industry include Microsoft, Nvidia, Broadcom, and Oracle.

In contrast, the earnings of the Energy sector are expected to decrease by 20.9% compared to the same period last year. This sector includes oil and gas giants such as ExxonMobil, Chevron, EOG Resources, Schlumberger, and ConocoPhillips, which is the largest decline among all sectors to date.

In any case, investors will face more uncertainty in October. Goldman Sachs emphasized that signals from the options market indicate that there may be significant stock fluctuations after the release of quarterly reports.John Marshall, head of derivatives research at Goldman Sachs, wrote: "The rise in option prices is attributed to geopolitical events, as well as seasonal high earnings volatility and expectations for the Federal Open Market Committee (FOMC) meeting in November. This increase in tension raises the possibility of stocks rebounding after their respective earnings reports."

"Soft Landing" or "No Landing"?

The Federal Reserve is continuously working towards a "soft landing" for the U.S. economy, and the strong start of the already released earnings reports sends a signal of economic resilience and market activity, supporting the expectation of a "soft landing."

Analysts say that looking at the already released earnings reports, the consumer and corporate customer businesses of Wall Street's major banks are generally strong, indicating that the U.S. economy could achieve a "soft landing."

According to a mid-September survey by the Financial Times, most economists predict that the U.S. economy is heading towards a "soft landing," with the economy expanding and inflation rates falling back to the Federal Reserve's 2% target. Subsequently, the Federal Reserve began to correct the abnormal interest rates by lowering them by 0.5 percentage points, which is also seen as greatly increasing the chances of a "soft landing" for the economy.

Economists predict that by the end of this year, the unemployment rate will rise to 4.5%, but it is still at a historical low, and the core personal consumption expenditure index, the inflation indicator that the Federal Reserve prioritizes, will drop from 2.6% in July to 2.2%.

There are many similar judgments, based on the belief that after a period of high borrowing costs, the U.S. economy is heading towards the best outcome expected by the Federal Reserve: robust growth, low inflation, and healthy employment.

Indeed, the latest data from the U.S. labor market shows positive signals. Data from the U.S. Bureau of Labor Statistics shows that U.S. employers unexpectedly added 254,000 jobs in September, far exceeding economists' expectations of 150,000 new jobs. The unemployment rate also fell to 4.1%.

Experts say that the labor market has ended a months-long slowdown, eliminating ongoing concerns about an imminent recession and easing the pressure on the Federal Reserve to stimulate the economy through rapid interest rate cuts.

Inflation has also continued to decline, with the U.S. unadjusted CPI annual rate in September falling from 2.5% in the previous month to 2.4%, marking the sixth consecutive month of decline and hitting a new low since February 2021, which may also provide a reason for the Federal Reserve to slow down the pace of interest rate cuts.On the consumption front, the latest data released by the U.S. Department of Commerce shows that after a sequential increase of 0.1% in August, U.S. retail sales unexpectedly rose by 0.4% in September, exceeding economists' expectations. This indicates that despite the long-term pressure of high interest rates, U.S. consumer spending remains highly resilient.

However, a study by the Federal Reserve's economic team also indicates that the consumers driving U.S. economic growth are increasingly concentrated among those with higher incomes. They may be enjoying a substantial wealth expansion effect from the rise in financial asset prices, such as stocks.

It is noteworthy that as the industry widely discusses whether the U.S. economy will have a "soft landing" or a "hard landing," the vigilance against a "no landing" scenario is also increasing.

The so-called "no landing" refers to the situation where the economy, after high growth, does not experience the expected slowdown or recession but continues to maintain strong growth momentum, and inflation is not effectively controlled, leaving the Federal Reserve with no room to lower interest rates.

Tony Pasquariello, a top trader at Goldman Sachs and head of hedge fund research, warned that Goldman Sachs' U.S. economic surprise index is at its highest level in the past six months, a performance that roughly aligns with the "no landing" view.