Big Banks Beat Expectations Amid Fed Caution and Global Market Shifts

QU Economics Research Team
Oct 22
4 min read

Updated: Oct 28

Market Weekly Commentary | As of October 20th, 2025

A Recap of Economic and Financial Trends from the Prior Week

By: Khadija Farooqi, The Quinnipiac University Global Economics Research Team

Economic Recap

Key economic events last week included updates from the Federal Reserve and notable developments in global markets. Federal Reserve Chair Jerome Powell, speaking Tuesday at the Meeting of the National Association for Business Economics, indicated that the central bank remains on track to cut short-term interest rates later this year, noting that the “downside risks to employment” have shifted the balance of risks in the economy. On Wednesday, the Fed released its Beige Book, which highlighted that economic activity was “little changed” across districts, with employment levels steady and wages rising, though consumer spending “inched down,” “prices rose further,” and “more employers reported lowering head counts through layoffs and attrition.” Abroad, Japan reacted to Sanae Takaichi’s election as leader of the Liberal Democratic Party, positioning her to become the next prime minister, with markets anticipating fiscal stimulus and policy direction following coalition negotiations. In China, the core consumer price index rose to a 19-month high of 1.0% year-on-year, signaling uneven inflation pressures ahead of the Communist Party’s fourth plenum scheduled for October 20–23.

Market Recap

Source: JPMorgan Asset Management, “Weekly Market Recap” (October 20, 2025).(Chart © JPMorgan Asset Management. Chart used under fair use for educational commentary by The Quinnipiac Global Economics Research Team.)

Equity markets were volatile but ended the week higher. The S&P 500 rose 1.71 percent, rebounding from a sharp sell-off the prior Friday. Early-week progress on U.S.–China trade tensions and AI-related deals supported sentiment. One notable AI deal last week was the official announcement of a partnership between Broadcom and OpenAI on Monday to build and deploy 10 gigawatts of custom AI accelerators, which sent Broadcom shares up 9.88 percent. About 12 percent of S&P 500 companies had reported as of Friday morning, with 86 percent beating consensus estimates. The CBOE Volatility Index spiked to its highest level since April amid regional bank credit concerns. U.S. Treasuries advanced, with the 10-year note hitting its lowest level since October 2024. Globally, Japan’s Nikkei 225 fell 1.05 percent on yen strength, China’s CSI 300 dropped 2.22 percent amid trade concerns, and European markets were mixed, with France’s CAC 40 up 3.24 percent, Germany’s DAX down 1.69 percent, and Italy’s FTSE MIB down 0.69 percent.

Calendar

Economic Data:

Oct. 20: Leading Economic Indicators (Sept.)
Oct. 24: Consumer Price Index & Core CPI (Sept.), S&P Flash Services & Manufacturing PMIs (Oct.), Consumer Sentiment (final, Oct.), New Home Sales (Sept.)

**Note: Some releases are temporarily suspended due to the federal government shutdown.

Major Corporate Earnings:

Oct. 21: Netflix, GE Aerospace, Coca-Cola
Oct. 24: Procter & Gamble

Market Theme

Big Banks Beat Expectations

Last week, major U.S. banks reported solid third-quarter results, generally in line with or exceeding expectations. JPMorgan Chase posted net income of $14.4 billion, up 12% YoY, with trading revenues jumping 25% and investment banking fees rising 16%. Goldman Sachs’ revenue climbed 20% to $15.2 billion, with net income up 37% to $4.1 billion, driven by strong deal-making and trading. Wells Fargo reported net income of $5.6 billion, up 9% YoY, supported by lending and wealth management. BlackRock’s revenue rose 25% to $6.5 billion, with adjusted EPS slightly up at $11.55. Analysts expected solid performance in trading and investment banking, and results generally matched or exceeded these benchmarks.

Chart of the Week

U.S. consumers remained resilient in the third quarter. The Chicago Fed’s CARTS data suggest retail sales excluding autos likely rose 0.5% month-over-month in September, marking the fastest quarterly nominal growth in two years at an annualized 6.2%, while adjusting for inflation shows a solid 3.3% annualized pace. Chase card data indicate similar trends, with spending excluding autos up 0.7% month-over-month. Although lower-income households have lagged behind higher-income consumers, the steady spending among wealthier households has helped sustain economic growth and alleviated fears of a near-term recession.

Market Outlook

This week, investors will focus on U.S. CPI data and Q3 earnings to gauge inflation trends and the resilience of corporate profits, particularly in AI-driven sectors. Market participants will also watch U.S.-China trade developments, as any shifts could influence sentiment and volatility across global markets. In Japan, Prime Minister-designate Takaichi’s early policy moves, and coalition updates could affect equity and bond markets, while in China, the Communist Party’s fourth plenum may provide insights on domestic consumption and economic reforms.

Heard it on a Pod

On the October 16, 2025, episode of The Markets podcast, Goldman Sachs’ Mike Washington highlighted the growing concentration in U.S. equities. He noted, “The top 10 stocks in the US make up 25%, a quarter of the global stock market, globally. It's astonishing how concentrated that this market has gotten.” Washington also emphasized that despite potential shocks like tariffs, retail and foreign investment flows remain robust, supporting market stability, though he recommended investors consider downside protection given possible short-term volatility.

Source: Goldman Sachs, “The Markets: The Bubble Question,” Podcast, October 16, 2025.

Further Reading

Alternative Data During the Shutdown