Closing Bell 10/12/26

JPMorgan Chase & Co.

Across the shows: 2 speakers in other episodes, 1 bullish and 0 bearish calls, past 30 days

• David Chiaverini · JefferiesBullish

  JPMorgan's investment banking and markets revenue should rise mid-to-high teens, a positive outlier.

  Using Visible Alpha-style consensus numbers from Theologic, David expects total investment banking revenue to fall meaningfully year over year and sequentially, but JPMorgan is the positive outlier. He expects its investment banking and markets revenue to be up mid-to-high teens because it has been involved in some of the bigger deals this quarter, which gives it a nice tailwind.

  “We are expecting them to be up mid to high teens in terms of their investment banking and markets revenue.”at 22:59

Bank of America

Across the shows: 1 speaker in other episodes, 0 bullish and 1 bearish calls, past 30 days

• David Chiaverini · JefferiesBearish

  Bank of America's investment banking and markets revenue likely flat, making it the negative outlier.

  David expects Bank of America to show challenges in investment banking and markets revenue, calling for it to be flat. It faces tough comparisons from a year ago. It is also less positioned in fixed income trading than JPMorgan, with less focus on micro trading and more on macro trading, which is hurting it. Capital allocated to markets businesses is also being reduced at some banks.

  “The negative outlier, BofA, they showed some challenges in terms of their investment banking as well as their market revenue, calling for it to be, you know, flat.”at 22:59

US stock market outlook

• Matt Stucky · Northwestern Mutual Wealth Management Company

  Market direction through year-end hinges on valuation multiples, driven by Fed hawkishness and yields, not earnings.

  Matt argues that earnings growth is strong enough that the path of the market from here depends on the multiple. That multiple depends on Fed hawkishness and where the 10-year rate goes, which in turn is shaped by inflation and oil. Cost of capital is the main issue, and the outlook for the multiple remains uncertain.

  “what might drive things from here through year end has to do with the multiple side, not the earning side.”at 2:58

• Ayako Yoshioka · Wealth Enhancement Group

  Correction risk hinges on hyperscaler AI capex; weak follow-through could trigger a pullback into 2027.

  Concentration in the AI trade, now touching 50% of S&P 500 companies, is a market issue. Whether a correction comes depends on what hyperscalers say about AI capex and the AI supply chain. Last quarter hyperscalers showed strong cloud growth and good returns on investment, and Ayako wants that to continue. Without it, a correction could come to level set expectations for 2027.

  “I think it's really gonna depend upon what the hyperscalers say about capital spending going forward on AI... If we don't get that, there could be some, of a correction, just to level set where we're gonna go in 2027.”at 4:40

• Scott Chronert · Citi Research

  S&P 500 reaching 8,100 requires the broadening trade to return and rate-sensitive stocks to recover.

  Citi's path to 8,100 needs both halves of the market to perform. The AI component, just over half the index, keeps providing earnings tailwinds, while the other half needs a macro recovery. Scott needs the rate-sensitive, lagging parts of the market to mean-revert and the broadening trade to return, which depends on inflation and hawkish Fed concern fading as the data suggests over the next couple of weeks.

  “I would say that we need this broadening trade to come back to get to my 8,100 target.”at 5:28

• Matt Stucky · Northwestern Mutual Wealth Management Company

  Market breadth rises and falls with Fed hike pricing; broadening returns when hikes get priced out.

  Since hawkish Fed tone began in early August, the share of companies trading above their 200-day moving average fell from the mid-sixties to the low forties. Matt attributes this to Fed hawkish talk and higher longer-term rates as the hiking cycle was priced in over the next twelve months. Breadth has ebbed and flowed with hike expectations, and he expects it to keep moving with CPI and the Fed's path.

  “you see [breadth] plummet from, you know, around mid sixties or so companies trading above their two hundred day moving average to the low forties today”at 11:37

• Matt Stucky · Northwestern Mutual Wealth Management Company

  Rates are the main correction trigger, not unemployment, which remains low; rates are a caution flag.

  Matt says historically corrections come from a sharp rise in long-term rates or a rise in unemployment. Unemployment remains low, but rates are significantly higher without much pain showing in the S&P 500 so far. That makes rates the area to watch, and he flags it as a caution point. Earnings growth has not slowed so far, due to the AI build-out.

  “If you look over history, what causes corrections is usually one or two things. It's either a sharp back up in long term rates or back up the unemployment rate.”at 14:52

• Andrew Kligerman · Crescent Grove Advisors

  Favors equal-weight and value rotation away from the concentrated top-10 S&P 500 names.

  Kligerman says his firm continues to like the equal-weight and value trade. Portfolio hygiene calls for managing concentration risk in the top 10 S&P 500 names, which have grown very large. He argues the market has seen a stealth correction beneath the surface, so buying the broader names means entering at much more attractive valuations. He describes it as rotating out of the winners and into laggards.

  “We we like that trade. We continue to like that trade. And as much as anything for us... it's good portfolio hygiene to think about... the concentration risk that comes with the top 10 names”at 43:50

• Andrew Kligerman · Crescent Grove Advisors

  Equity risk premium unlikely to compress at current real yields, so earnings must drive S&P 500 returns.

  Kligerman compares the S&P 500 earnings yield with current real yields. With real yields where they are, he finds it hard to see the equity risk premium compress, so valuations are unlikely to re-rate higher. Earnings growth has to do the heavy lifting for returns. He says a softer inflation print and a pullback in the 10-year yield could give some room for the equal-weight side to rise.

  “It would be hard to see that the equity risk premium compress given where real yields are at this point. So we feel like it's really gonna be on earnings to do the the heaviest lifting.”at 44:39

Banks

• Matt Stucky · Northwestern Mutual Wealth Management Company

  Higher rates are positive for bank net interest income; fee businesses like M&A are the open question.

  Most banks are asset sensitive, so higher rates help net interest income. Some deposit pricing pressure is possible, but asset repricing on maturities and strong loan demand support the outlook. The bigger question is fee businesses: whether higher rates slow M&A and investment banking activity, which he expects to hear about in bank earnings.

  “looking at NII, I think it's a positive for a few reasons. One is, you know, most banks tend to be asset sensitive”at 8:58

• Ayako Yoshioka · Wealth Enhancement Group

  Financials are attractive despite weak earnings growth; banks trade near 14.5x and benefit from higher rates.

  Financials show the worst year-over-year earnings growth in the S&P 500, at only 3% going into Q3. Ayako still likes the sector for the long-term effects of higher rates and because banks have multiple ways to win across fee, capital markets and investment banking. Banks are trading at good valuations, around 14.5 times earnings.

  “But we do like a lot of the long term impacts of higher rates. And banks have multiple ways to win, whether it's the fee business, capital markets, investment banking. So we do like financials here.”at 10:03

• David Chiaverini · Jefferies

  Low expectations and manageable capital hits set up relief rallies for banks in earnings.

  Bank stocks sold off into earnings on rate concerns and soft trading and investment banking expectations. David says the bar is low because negative sentiment is high. Lower durations mean the capital hit from higher rates should be more manageable this time. Net interest margins should be stable to up modestly because the yield curve has kept its steepness. He expects good relief rallies over the next few days.

  “So I am expecting pretty good relief rallies from these banks over the next few days.”at 20:51

• David Chiaverini · Jefferies

  Concern that AI agents like Meta's Muse will drain bank deposits is noise; deposits should stay stable.

  The bigger issue for banks is loan demand and the risk that higher rates slow the economy and hurt credit quality. David dismisses the Muse deposit-flight concern as noise. Depositors are inert, so non-interest-bearing deposits at most banks should stay stable, and people are unlikely to hand over their banking credentials to an AI agent this early in its launch.

  “As it relates to muse, I think that's more noise. I think that the inertia of depositors will keep the non interest bearing deposits for most of banks to be stable”at 21:58

Earnings & corporate profits

• Matt Stucky · Northwestern Mutual Wealth Management Company

  Q3 S&P earnings growth likely in the upper twenties, a strong result, though below Q2.

  Matt expects positive earnings season results, though not as strong as Q2's roughly low-thirties year-over-year growth. If consensus is right, Q3 should land in the upper twenties or a bit better. He notes that the market's direction through year-end depends more on the multiple, which is driven by Fed hawkishness, the 10-year rate, inflation and oil, than on earnings.

  “if the consensus is right, we're likely to see something in the upper twenties, maybe a little bit better than that.”at 2:58

• Scott Chronert · Citi Research

  AI-driven earnings growth should moderate into 2027 as AI tailwinds are priced in; fundamentals remain robust.

  The market has had about four years of rapid earnings upside, and the AI tailwinds are increasingly priced in. Because of the law of large numbers, earnings growth rates should mitigate as the market moves into 2027. Scott says this is not bad: the pace of gains slows, making surging stock returns harder to achieve, while the underlying fundamental picture stays fairly robust and helped by rates.

  “I think what we have to allow for that more and more about the AI tailwinds are being priced in, and law of numbers is such that we have to expect as we go into '27 that those growth rates probably begin to mitigate a little bit.”at 13:41

• Andrew Kligerman · Crescent Grove Advisors

  S&P 500 earnings likely strong, with mid-20% year-over-year growth and about 11% revenue growth.

  Kligerman says earnings are more likely than not to be strong. He cites forecasts of mid-20% year-over-year earnings growth for the S&P 500 and about 11% year-over-year top-line growth. He calls this a healthy corporate earnings and revenue backdrop, which he sees as the basis for equity returns.

  “It looks like earnings more likely than not gonna be strong. Right? We're looking at, call it, mid 20% earnings growth year over year for the S and P 500, at least being forecasting a top line... 11% year over year.”at 42:55

US Treasuries & yields

• Scott Chronert · Citi Research

  Ten-year Treasury yields are close to a short-term peak, pending incoming data.

  Scott sees signs of a top in the two-year and to a degree in the ten-year when looking at the distribution along the curve. He expects the CPI report that week to show less concern in some components, which supports the view. He is explicit that the call depends on the data coming through, and he will be closely watching yields.

  “we think we're pretty close in the short term to a ten year top for sure in terms of yields”at 10:56

• Andrew Kligerman · Crescent Grove Advisors

  Softer CPI could bring Treasury yields down and revive the broadening equity trade.

  Kligerman says CPI, and PPI as a companion input for projecting PCE, will be closely watched. If CPI shows softness, the 10-year yield could come off its recent highs. That would allow a resumption of the broadening trade, meaning small caps and S&P 500 equal weight, away from the mega-cap names. He treats the direction of yields as the key thing to watch for that rotation.

  “particularly close attention will be paid to CPI... if you could see a little bit of softness in CPI in particular, maybe you could see the tenure come off the boil.”at 42:01

• Andrew Kligerman · Crescent Grove Advisors

  Treasuries and munis are now a credible alternative to equities, with munis cheap versus Treasuries.

  Kligerman says that as yields have risen, clients have asked about bonds as an alternative to stocks. He calls a 10-year Treasury or a highly rated 10-year muni a credible alternative, especially for top-bracket taxpayers. He argues AAA munis look cheap relative to Treasuries, which makes them attractive for investors who want cash flow. He concludes that earnings growth must therefore do heavy lifting for equities.

  “It's a credible alternative in this environment when you can go into a ten year treasury or something like a ten year municipal bond, highly rated muni bond.”at 45:24

AI infrastructure & data centers

• Matt Stucky · Northwestern Mutual Wealth Management Company

  Hyperscaler AI spending keeps semiconductor margins strong; expects continued strength this earnings season.

  The AI build-out is why earnings growth has held up so far. As long as hyperscalers keep spending, semiconductors should keep strong margins. Matt cites incremental margins for hyperscalers in the mid-fifties, which explains why they keep spending. He expects continued strength from them in the upcoming reports.

  “So as long as hyperscalers are continuing to spend, semiconductors are going to continue to have really strong margins in that type of environment.”at 14:52

Private Equity and Private Credit

• David Chiaverini · Jefferies

  Higher yields make private credit attractive, but weaker IRRs slow private equity deployment and private credit lending.

  Higher yields make private credit investments more attractive. However, when you calculate returns, IRRs become harder for private equity funds to deploy dry powder into deals. Private credit funds fund deals only when private equity puts money to work, so the rate environment is double-edged, though private credit providers would want to deploy more capital given rates.

  “You know, it's a double edged sword as it comes to, private credit because higher yields does make the investments more attractive.”at 24:54