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Insider Today: Big banks’ cloudy forecast

Welcome back! Hopefully you didn’t get too wild if you had a boozy brunch on Sunday. A few restaurants added fees for parties that don’t drink responsibly. 

Rolling  days formula — Smartsheet Community
Rolling days formula — Smartsheet Community

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. 

What’s on deck: 

AT-A-GLANCE “Today Is” Daily Wall Calendar Refill , January – December,   x  Inches (K)
AT-A-GLANCE “Today Is” Daily Wall Calendar Refill , January – December, x Inches (K)

But first, earnings season is here.

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AAGK - At-a-Glance Recycled amp;quot; Today Isamp;quot; Wall Calendar
AAGK – At-a-Glance Recycled amp;quot; Today Isamp;quot; Wall Calendar

The big story

Trouble brewing

Current Day Number - What Number Day of the Year Is It?
Current Day Number – What Number Day of the Year Is It?

REUTERS/Dylan Martinez

On the surface, earnings season got off to a great start.

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.

Julian Restrepo/Citigroup via AP

But perhaps there’s solace on the job front! 

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.

3 things in markets Wegovy injection pens Michael Siluk/UCG/Universal Images Group via Getty Images

Welcome to the stock market’s Ozempic era. The weight-loss drug is doing more than just shrinking users’ waistlines; it’s upending entire companies. While the healthcare industry is the most obvious candidate for disruption, everything from food companies to airlines could be next. Meanwhile, there’s a debate over whether employers should pay for workers’ weight-loss drugs.

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. 

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. 

3 things in tech Walter Isaacson identified some similarities between Elon Musk and Steve Jobs in his book on the Tesla CEO. Justin Sullivan/Getty Images and Tim Mosenfelder/Getty Images

Elon Musk vs. Steve Jobs. A biographer spent years following both tech figures. He revealed the key similarities and differences between the two famed techies.

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.”

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.

3 things in business Tyler Le/Insider

How big your raise will likely be next year. By crunching the numbers, employers appear to be on track to increase their salary budgets by about 4% next year. Although that’s a bit lower than this year, inflation is expected to slow to only 2.6%.

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.

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.

In other newsWhat’s happening today

It’s National Dictionary Day! This is the day that Noah Webster was born. He’s considered the “father of the American dictionary.”

PETA plans to hold a vegan cheese giveaway outside the World Dairy Summit in Chicago. Supporters will hold signs that say “Not Your Mom, Not Your Milk.”

Happy birthday, Naomi Osaka! Angela Lansbury, Sue Bird, Oscar Wilde, and Bryce Harper were also born today.

For your bookmarks

Flight attendant essentials

CiCi always packs her own snacks in a snack box. @cici.inthesky/Instagram

A flight attendant revealed the five items she never flies without. Tennis balls and cotton rounds are among her flight must-haves.

The Insider Today team: 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.