In today’s big story, we’re looking at why strong earnings results from some big banks weren’t necessarily the big win markets were hoping for.

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JPMorgan, Citigroup, and Wells Fargo’s third-quarter results beat analysts’ expectations. Notching wins from some of the nation’s biggest banks was a welcome change after a brutal few months for the stock market.

But beneath the surface, all is not well. And that could spell trouble for the broader market hoping for a banner earnings season to help it finish the year on a positive.

Jamie Dimon, JPMorgan’s CEO and arguably the world’s most recognizable banker, was direct.

“This may be the most dangerous time the world has seen in decades,” he said in a press release announcing the bank’s earnings.

Among the risks: the effects of the Fed tightening its balance sheet; stricter capital requirements on lenders; high interest rates; growing US debt; and conflicts in Ukraine and Israel.

To the final point, Dimon said during JPMorgan’s earnings call that geopolitics is an “extraordinary issue” the bank has to deal with. It’s a threat he’s consistently called out.

JPMorgan and Citi both reported headcounts were up 7% and 1%, respectively. So there’s that.

But here, too, there’s more to the story, writes Emmalyse Brownstein. Many of those new hires were on the tech side of things, which raises questions about the type of work they might ultimately automate away.

Citi CFO Mark Mason acknowledged the bank’s investment in tech would help it reduce head count as part of the firm’s massive reorg.

JPMorgan, meanwhile, seems keen to become a key figure in the AI arms race. Dimon pointed to the bank’s proprietary data as a differentiator. He also highlighted JPMorgan’s firmwide chief data and analytics officer, Teresa Heitsenrether.

Dimon has previously acknowledged that AI will make some roles obsolete. Despite this, he believes it will improve the quality of life for the next generation of workers.

The job outlooks for the rest of the Street look no better. Reports of cuts at Goldman Sachs and Barclays have already surfaced. And Credit Suisse notified the New York Department of Labor about a reduction at its US headquarters.

Even bank CEOs feel a shift in vibe due to the macro dynamics.

On Citi’s earnings call, CEO Jane Fraser said she noticed a change in attitude from clients during a busy month of meetings.

“I’m struck how consistently CEOs are less optimistic about 2024 than a few months ago,” Fraser said.

🔔 Before the opening bell: US stock futures trade mixed early Monday ahead of a busy week for corporate earnings. 

2. Junk-rated debt is looking more and more like… junk. The risk of non-investment grade US companies refinancing or outright defaulting on their debt is growing, according to a Moody’s report. High interest rates and tight financial conditions spell trouble for the $1.87 trillion of junk-rated debt maturing over the next five years.

3. Ending on a high note. One market veteran predicts stocks will rally for the final stretch of the year due to a strong earnings season. Tech stocks, in particular, could see a big boost that leads to double-digit gains before year-end, according to a research note from Wedbush Securities.

2. Strange Amazon job posting: the company could be fishing for “opportunistic” hires. The company accidentally published a job opening for a director of security engineering. But the job description said the listing would be used “to push through opportunistic candidates to have conversations with security leaders.”

3. AI is coming to Microsoft Outlook to help write better emails. The tool is called Microsoft 365 Copilot and would help create “polished and professional” suggestions for emails. A group of customers are currently testing the feature, and it’ll be more widely available in November.

2. The boom in luxury goods is over. Consumers are starting to pull back on their multiyear high-end spending spree. Luxury brands had previously been seen as “recession proof.” But high-income consumers are no longer boosting their profits during uncertain economic times.

3. Mind tricks that retailers use to make discounts seem bigger than they are. They’re advertising the percentage that an item is discounted by. But a percentage discount doesn’t mean you’re getting a good deal if the original price was already greatly inflated.

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Dan DeFrancesco, senior editor and anchor, in New York City. Diamond Naga Siu, senior reporter, in San Diego. Hallam Bullock, editor, in London. Lisa Ryan, executive editor, in New York.

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