Goldman Sachs Group Inc

Apple and Goldman Sachs ordered to pay more than $89 million for Apple Card failures

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Apple CEO Tim Cook introduces the Apple Card during a launch event at the Apple headquarters in Cupertino, California, on March 25, 2019.

Noah Berger | AFP | Getty Images

The Consumer Financial Protection Bureau ordered Apple and Goldman Sachs on Wednesday to pay more than $89 million for mishandling consumer disputes related to Apple Card transactions.

The bureau said Apple failed to send tens of thousands of consumer disputes to Goldman Sachs. Even when Goldman Sachs did receive disputes, the CFPB said the bank did not follow federal requirements when investigating the cases.

Goldman Sachs was ordered to pay a $45 million civil penalty and $19.8 million in redress, while Apple was fined $25 million. The bureau also banned Goldman Sachs from launching new credit cards unless it can provide an adequate plan to comply with the law.

“Apple and Goldman Sachs illegally sidestepped their legal obligations for Apple Card borrowers. Big Tech companies and big Wall Street firms should not behave as if they are exempt from federal law,” said CFPB Director Rohit Chopra.

Apple Card was first launched in 2019 as a credit card alternative, hinged on Apple Pay, the company’s mobile payment and digital wallet service. The company partnered with Goldman Sachs as its issuing bank, and advertised the card as more simple and transparent than other credit cards.

That December, the companies launched a new feature that allowed users to finance certain Apple devices with the card through interest-free monthly installments.

But the CFPB found that Apple and Goldman Sachs misled consumers about the interest-free payment plans for Apple devices. While many customers thought they would get automatic interest-free monthly payments when they bought Apple devices with an Apple Card, they were still charged interest. Goldman Sachs did not adequately communicate to consumers about how the refunds would work, which meant some people ended up paying additional interest charges, according to the CFPB.

It also meant some consumers had incorrect credit reports, the agency said.

“Apple Card is one of the most consumer-friendly credit cards that has ever been offered. We worked diligently to address certain technological and operational challenges that we experienced after launch and have already handled them with impacted customers,” Nick Carcaterra, vice president of Goldman Sachs corporate communications, told CNBC. “We are pleased to have reached a resolution with the CFPB and are proud to have developed such an innovative and award-winning product alongside Apple.”

Representatives from Apple did not immediately respond to CNBC’s request for comment.

— CNBC’s Hugh Son contributed to this report.

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October 23, 2024

AI on the trading floor: Morgan Stanley expands OpenAI-powered chatbot tools to Wall Street division

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Morgan Stanley is expanding the use of OpenAI-powered, generative artificial intelligence tools to its vaunted investment banking and trading division, CNBC has learned.

The firm, which launched an AI assistant based on OpenAI’s ChatGPT technology to its wealth management advisors in early 2023, began rolling out another version called AskResearchGPT this summer in its institutional securities group, said Katy Huberty, Morgan Stanley’s global director of research.

The tool lets users extract answers from across the universe of Morgan Stanley’s research — including on stocks, commodities, industry trends and regions — collapsing what could otherwise be the cumbersome task of gleaning insights from the more than 70,000 reports produced annually by the bank.

“We see it as a game changer from a productivity standpoint, both for our research analysts and our colleagues across institutional securities,” Huberty said in an interview. The tool helps staff “access the highest quality, most insightful information as efficiently as possible.”

Since its arrival as a viral consumer app in late 2022, OpenAI’s generative AI technology has been swiftly adopted by Wall Street’s largest players.

Morgan Stanley says that close to half of its 80,000 employees are using generative AI tools created with OpenAI, while at rival JPMorgan Chase, about 60% of the firm’s 316,043 employees have access to a platform using OpenAI’s models, said a person with knowledge of the matter who wasn’t authorized to disclose the figure publicly. The San Francisco-based startup recently raised money at a $157 billion valuation.

OpenAI already has network advantages in financial services because of its ample funding and early focus on use cases for banks, said Pierre Buhler, a banking consultant with SSA & Co.

“They are ahead of everyone else in terms of market penetration,” Buhler said.”But it is an emerging market, and we are still at the very beginning.” It’s likely that competitors to OpenAI such as Anthropic will gain use over time, he added.

Viral hit

At Morgan Stanley, a leader in global investment banking and trading along with JPMorgan and Goldman Sachs, employees have gravitated toward AskResearchGPT, using it instead of getting on the phone or lobbing an email to the research department, Huberty said.

Employees are asking the tool three times the number of questions as compared with a previous tool based on traditional AI that’s been in use since 2017, according to the bank.

It’s most in-demand among salespeople and other client-facing staff who often field questions from hedge funds or other institutional investors, said Huberty.

“We found that it takes a salesperson one-tenth of the time to respond to the average client inquiry” using AskResearchGPT, she said.

Productivity boost

In a recent demonstration, the GPT-4 based chatbot was able to summarize Morgan Stanley’s position on matters from copper to Nvidia to the finer points of standing up a data center, understanding industry-specific jargon and providing charts and links to source material.

The bank wants to push adoption further in light of the productivity gains it’s seeing, Huberty said. The tool is embedded within workers’ browsers as well as Microsoft Teams and Outlook programs to make it readily available.

Understandably, Huberty says she is often asked if AI could ultimately replace the analysts who are creating the reams of research published under Morgan Stanley’s banner.

“I don’t see in the near future a path to just having the machine write the research report to generate the idea,” she said. “I really think that it’s humans who make the call and own the relationship, which is a really important part of the analyst job, or sales and trading job, or corporate banker job.”

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October 23, 2024

We’re raising our Morgan Stanley price target after a post-earnings stock surge to record highs

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Morgan Stanley shares soared to all-time highs Wednesday after third-quarter beats on the bank’s top and bottom lines, with strength seen across the board. Revenue for the three months ended Sept. 30 increased nearly 16% year over year to $15.38 billion, outpacing expectations of $14.4 billion, according to estimates compiled by LSEG. Earnings per share (EPS) jumped over 36% versus the year-ago period to $1.88, exceeding the $1.58 expected, according to LSEG. MS YTD mountain Morgan Stanley YTD Club stock Morgan Stanley was up 7.5%. At one stage it was even higher, punching through our $120 price target. We are setting a new PT of $130 and keeping our wait-for-a-pullback 2 rating in deference to the stock’s hot streak — up over 13% from its July high before the August market swoon and up 33% from its Aug. 5 low. Bottom line This was as clean a quarter as anyone could have asked for. Morgan Stanley outpaced expectations in just about every aspect of each operating division and put up very strong quarterly results in terms of firmwide key performance indicators. Last quarter, when the results weren’t quite what we were looking for, we told members that patience was warranted, and we would likely see dynamics improve in wealth management — a key focus area for investors who want to see the bank’s durable fee-based revenue streams continue to grow. That’s exactly what we saw with Wednesday morning’s release. Investment banking also shined as it did for its rivals, including fellow Club name Wells Fargo , which saw its overall earnings report and commentary on Friday blow the doors off. Wells Fargo stock on Wednesday was trying to extend its winning streak to nine straight sessions. We continue to believe that the improvements we’re seeing at Morgan Stanley in terms of efficiency and disciplined execution will magnify the tailwinds of a resilient U.S. economy and stimulus activity internationally. Commentary Return on tangible common equity (ROTCE) is an important metric in valuing financial institutions, such as determining what multiple to put on tangible book value, which came in at $43.76 per share. Morgan Stanley’s third-quarter ROTCE of 17.5% blew away expectations of 14.8%, according to estimates compiled by Bloomberg. On a year-to-date basis, the bank has realized an 18.2% ROTCE. The common equity tier 1 (CET1) ratio, meanwhile, indicates a financial institution’s ability to return cash to shareholders via buybacks and dividend payments. For that reason, we’re very happy to see that stand at 15.1%. That’s a hair lower than the 15.3% the Street was expecting but not too concerning. Total client assets across wealth management and investment management have now exceeded $7.5 trillion, a nearly $1.4 trillion increase over what we saw a year ago as management continues to execute on its mission of reaching $10 trillion over the long term. The overall efficiency ratio , which is calculated by dividing total non-interest expenses by net revenue — so lower is better — came in well below expectations and declined 300 basis points versus the year-ago period – though importantly did not come at the cost of continued investments in the business. On the call, CFO Sharon Yeshaya noted that in addition to revenue growth, the efficiency ratio improvement was the result of “disciplined prioritization of our controllable spend.” Morgan Stanley repurchased $750 million worth of shares in the third quarter — 8 million shares total — at an average purchase price of $99.94 each, which in light of Wednesday stock price looks like a pretty good move for shareholders. Given its 15.1% CET1 ratio, Morgan Stanley has plenty of excess capital at its disposal to both continue investing in growth and return excess capital to shareholders. Morgan Stanley Why we own it : We own Morgan Stanley for the rebound taking place in IPO and M & A activity along with growth in wealth management, which provides more durable fee-based revenues. We also view the bank’s excess capital as supportive of further shareholder returns via buybacks and dividends while also providing for additional investments in growth. Competitors : Goldman Sachs Weight in Club portfolio : 3.5% Most recent buy : Oct. 18, 2023 Initiated : July 12, 2021 Segments Institutional Securities in the third quarter benefited from strong international performance, with management calling out an acceleration in activity exiting the quarter, indicating the fourth quarter was also off to a strong start. In line with our thesis, CEO Ted Pick noted on the call that “a broadening equity market and evolving interest rate policy are favorable backdrops for our markets businesses.” Morgan Stanley’s large footprint allowed the firm to benefit from “shifting expectations around the size and timing of the Fed’s first rate cut” during the quarter, the change in monetary policy at the Bank of Japan and Chinese stimulus. Investment banking saw a pick-up in equity underwriting due to higher IPO activity and fixed income underwriting increased significantly from a year ago. Wealth management reported record revenue and a record pre-tax profit. Net new assets in the quarter were about $64 billion, well above the $53.5 billion expected and brings year-to-date net new assets to $195 billion, a 5% annualized increase versus where we started the year. Yeshaya said that “year-to-date flows are on pace to exceed last year, supported by an ongoing contribution of assets from advisor-led brokerage accounts to fee-based accounts.” The CFO expects net interest income “to be modestly down from the third quarter results largely on the back of lower rate expectations consistent with the forward curve.” That’s not too much of a concern given the Street has been looking for about $1.73 billion of net interest income in the current quarter. The pre-tax profit margin of 28.3%, a key watch item for investors given the increased focus on fee-based performance, outpaced the 26.8% consensus estimate and represents a very strong sequential increase versus the 26.8% we saw in the prior quarter. Investment management got a boost from higher asset management and related fees, which came on the back of an increase in assets under management. On the call, Yeshaya highlighted the benefits of the prior acquisition of Eaton Vance. (Jim Cramer’s Charitable Trust is long MS, WFC. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

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Morgan Stanley shares soared to all-time highs Wednesday after third-quarter beats on the bank’s top and bottom lines, with strength seen across the board.

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October 16, 2024

Morgan Stanley shares pop 7% after beating estimates for third-quarter profit and revenue

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Morgan Stanley on Wednesday topped analysts’ estimates for third-quarter profit as each of its three main divisions generated more revenue than expected.

Here’s what the company reported:

Earnings:$1.88 a share vs $1.58 LSEG estimate
Revenue: $15.38 billion vs. $14.41 billion estimate

The bank said profit rose 32% to $3.2 billion, or $1.88 per share, and revenue jumped 16% to $15.38 billion.

Morgan Stanley had several tail winds in its favor, starting with buoyant markets that helped its massive wealth management business, a rebound in investment banking after a dismal 2023, and strong trading activity. The Federal Reserve began taking down rates in the quarter, which should encourage more of the financing and merger activity that Wall Street firms capitalize on.

“The firm reported a strong third quarter in a constructive environment across our global footprint,” Morgan Stanley CEO Ted Pick said in the release.

Shares of the bank rose 7.5% in early trading.

The bank’s wealth management division saw revenue jump 14% from a year earlier to $7.27 billion, exceeding the StreetAccount estimate by nearly $400 million.

Equity trading revenue rose 21% to $3.05 billion, compared with the $2.77 billion estimate, while fixed income revenue edged 3% higher to $2 billion, also higher than the $1.85 billion estimate.

Investment banking revenue surged 56% from a year earlier to $1.46 billion, exceeding the $1.36 billion estimate.

Investment management, the firm’s smallest division, also exceeded expectations, posting a 9% increase in revenue to $1.46 billion, modestly higher than the $1.42 billion estimate.

Morgan Stanley’s Wall Street rivals also posted better-than-expected Wall Street revenue. JPMorgan Chase, Goldman Sachs and Citigroup topped estimates on strong revenue from trading and investment banking.

This story is developing. Please check back for updates.

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October 16, 2024

These 5 portfolio stocks outperformed the market’s incredible run since our September Monthly Meeting

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It’s been a stellar month for the U.S. stock market, driven largely by easing monetary policy. Since the Club’s last Monthly Meeting, investors have celebrated the Federal Reserve’s pivot to its rate-cutting era. The U.S. central bank announced its first interest rate reduction in more than four years on Sept. 18, sending stock benchmarks to all-time highs. Most recently, the S & P 500 and Dow Jones Industrial Average both closed at record levels Monday. The S & P and Dow are up 4.5% and 4%, respectively, since the Sept. 12 monthly gathering. We’ve taken advantage of the market highs. The rate cutting news sent Meta Platforms , Alphabet and Danaher higher, encouraging us to offload shares of each on Sept. 26 in an overbought market. The Club also exited Procter & Gamble on Oct. 8. The reasoning: There’s less need to hold onto traditional defensive names like consumer staples while the Fed is embarking on an easing cycle. We did hold onto our rate-sensitive names like Wells Fargo and Morgan Stanley , which were among the best performers since the last Monthly Meeting. (We sold a little of the latter, more details below). The improving macro backdrop on the back of loosening policy bodes well for Meta Platforms too. Meanwhile, continued investments around generative artificial intelligence boosted shares of Salesforce and Eaton , which rounded out the top five. Here’s a breakdown of what drove gains in each of these five Club stocks since the market close of the September meeting through Tuesday’s close ahead of Wednesday’s October Monthly meeting at noon ET . 1. Wells Fargo: 22% This stock got a boost after the Fed enacted its first rate cut in mid-September, which lifted the entire financials sector. That’s because lower borrowing costs can benefit Wells Fargo by stabilizing its interest-based revenue streams. The firm’s net interest income (NII) took hits during the higher-for-long rate environment as customers sought to park cash in higher-yielding alternatives. It weighed on the bank’s loan growth as well. Wells Fargo’s solid quarterly earnings release on Oct. 11, and subsequent positive Wall Street commentary in the sessions that followed, sent the stock to multi-year highs. We hiked our price target to $66 apiece from $61 on earnings, and reiterated our buy-equivalent 1 rating on the stock. 2. Morgan Stanley: 16.2% Following the Fed’s decision, shares advanced as investors became more optimistic about a soft landing for the U.S. economy. Morgan Stanley benefits from lower rates — and, in turn, a better economy — because it can usher in more Wall Street dealmaking such as initial public offerings and mergers and acquisitions. That’s great news for the turnaround story in Morgan Stanley’s crucial investment banking division. To be sure, we made a small sale of the financial stock on Sept. 19 after its post-Fed pop. That’s because the Club has been debating exiting Morgan Stanley altogether for a potentially better investment banking rebound play like Goldman Sachs. However, we hope to get more clarity on Morgan Stanley’s standing in the portfolio when the firm reports quarterly results Wednesday. 3. Salesforce: 13.8% What caused the double-digit percentage jump in this tech stock? Two words: artificial intelligence. Salesforce hosted its Dreamforce Conference last month, where CEO Marc Benioff touted Agentforce, the company’s AI-enhanced chatbot tools. Shares had their biggest single-day jump in nearly four months, at 5.4%, on Sept. 19 after management detailed more about the flagship offering. A flurry of positive Wall Street chatter followed suit, extending the run even further. Piper Sandler upgraded the stock to a buy rating from neutral on Sept. 24. A week later, Northland Capital Markets also raised its rating on the software maker to a buy-equivalent rating from hold. 4. Meta Platforms: 11.5% The social media giant trended higher after investors saw the unveiling of the Quest 3S , the latest VR headset from the company at the social media giants annual developer conference on Sept. 25. The stock continued to climb on positive signs for the company’s advertising business, which prompted UBS to hike the stock’s price target to $690 apiece from $635. Guggenheim raised the company’s price target to $665 from $600. Analysts at the firm argued that Meta was the top destination for incremental ad dollars, citing recent channel checks. 5. Eaton: 11.3% This industrial name doesn’t have one single catalyst for its outperformance. But increasing data center investments on the back of increased AI adoption, accompanied by upbeat Wall Street research, likely contributed to the stock’s climb. On Sept. 16, Citigroup initiated coverage of Eaton as a buy, sending shares higher. Analysts argued that Eaton will continue to benefit from the buildout of data center facilities, which will in turn increase demand for the company’s power management solutions. Morgan Stanley reiterated its buy-equivalent rating on Oct. 10, arguing that Eaton has a positive setup into earnings season. That same session, analysts at JPMorgan maintained their buy rating on Eaton and increased its price target to $349 apiece from $325. The stock traded near all-time highs on Tuesday. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Traders work on the floor of the New York Stock Exchange.

Angela Weiss | AFP | Getty Images

It’s been a stellar month for the U.S. stock market, driven largely by easing monetary policy.

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October 16, 2024

CNBC Daily Open: Bullish sentiment and broadening rally – markets are in a good place

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Traders work on the floor of the New York Stock Exchange on April 5, 2024.

Spencer Platt | Getty Images News | Getty Images

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Breather from rally
U.S. markets fell Tuesday, weighed down by a drop in semiconductor stocks and a 8.1% slide in UnitedHealth. Asia-Pacific stocks were mostly lower Wednesday. Asian chip stocks, like Tokyo Electron and Taiwan Semiconductor Manufacturing Company, retreated on news of ASML’s disappointing forecast and reports of the U.S. possibly imposing export controls on AI chips.

ASML slumps
Shares of semiconductor equipment manufacturer ASML plunged 16% on a downbeat earnings report. For 2025, the Netherlands-based company thinks net sales will come in at the lower half of its previous projection. ASML missed expectations on net bookings by 3 billion euros for the September quarter, though net sales beat expectations.

Better than ChatGPT
Alibaba updated its artificial-intelligence translation tool, based on a model called Marco MT, on Wednesday. The Chinese e-commerce giant said its product performs better than those by Google and DeepL, according to an assessment by benchmarking tool FLoRes. Fifteen languages are supported by Alibaba’s AI-powered translation tool.

Banks beat expectations
Goldman Sachs, Bank of America and Citigroup beat earnings and revenue estimates for their third quarter. Goldman was the standout performer: Its profit jumped 45% from a year earlier. Year on year, Bank of America experienced a 12% drop in net income and Citigroup’s net income fell 8.6%.

[PRO] Repositioning for slower rate cuts
September’s strong jobs report and higher-than-expected inflation reading mean that the U.S. Federal Reserve is unlikely to repeat its jumbo 50-basis-point rate cut at its November meeting. Here’s how strategists are repositioning in view of changing rate cut expectations.

The bottom line

Despite markets falling Tuesday, there’s still plenty to like about their current state.

Weighed down by ASML’s 16% dive and a report by Bloomberg on potential AI-chip export controls, semiconductor stocks like Nvidia and AMD fell 4.7% and 5.2% respectively. That gave the VanEck Semiconductor ETF its worst day since Sept. 3. As a result, the tech-heavy Nasdaq Composite lost 1.01%.

The Dow Jones Industrial Average, which just yesterday was basking in its accomplishment at closing above the 43,000 level for the first time, fell 0.75% to dip into the 42,000 territory again. UnitedHealth’s 8.1% drop dragged down the Dow.

Last, the S&P 500 retreated 0.76%.

Still, investors are the most bullish in four years, according to the October BofA Global Fund Manager Survey. They’re also optimistic about the economy: 74% investors believe the U.S. will avoid a recession.

Anticipation of more rate cuts by the U.S. Federal Reserve and hopes that Beijing will unleash more stimulus to boost its economy are driving up investor sentiment, according to Michael Hartnett, an investment strategist at BofA.

Indeed, San Francisco Fed President Mary Daly, who’s a member of the Federal Open Market Committee this year, noted that the central bank is “a long way from where [rates are] likely to settle.” That means “the decisions that are really in front of us are ones about how quickly to adjust towards that level” – not whether to keep rates high in light of how strong recent economic data has been.

Another positive sign for markets is how the S&P and Dow hit all-time highs on Monday, but the Nasdaq was still a few percentage points away from its peak. “This subtle divergence is technical evidence that the market has been moving away from the Magnificent Seven mega-caps,” wrote Piper Sandler’s chief market technician Craig Johnson.

– CNBC’s Jeff Cox, Samantha Subin, Yun Li, Lisa Kailai Han and Alex Harring contributed to this story.

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October 15, 2024

CNBC Daily Open: Bullish sentiment and broadening rally – plenty to like about markets

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Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., May 17, 2024.

Brendan McDermid | Reuters

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Breather from rally
U.S. markets fell Tuesday, weighed down by a drop in semiconductor stocks and a 8.1% slide in UnitedHealth. The pan-European Stoxx 600 index lost 0.8% as sectors diverged in performance. Tech stocks fell 6.36%, while telecoms stocks rose 1.97%. Separately, euro zone industrial production increased 1.8% between July and August, according to Eurostat.

Banks beat expectations
Goldman Sachs, Bank of America and Citigroup beat earnings and revenue estimates for their third quarter. Goldman was the standout performer: Its profit jumped 45% from a year earlier. Year on year, Bank of America experienced a 12% drop in net income and Citigroup’s net income fell 8.6%.

ASML slumps
Shares of semiconductor equipment manufacturer ASML plunged 16% on a downbeat earnings report. For 2025, the Netherlands-based company thinks net sales will come in at the lower half of its previous projection. ASML missed expectations on net bookings by 3 billion euros for the September quarter, though net sales beat expectations.

Israel might not hit oil facilities
After Israel reportedly told the U.S. it’s not planning to strike Iran’s oil facilities, prices for both West Texas Intermediate and Brent futures fell more than 4%. Earlier this week, OPEC cut its forecast for daily oil demand growth in 2024 to 1.9 million barrels per day from 2 million bpd. That was the third consecutive time this year it’s lowered expectations.

[PRO] S&P 500 at 6,400?
Stocks seem unstoppable. Two years into a bull market, the S&P 500 has been constantly hitting new closing highs. History suggests the bull tends to stall, or at least trip on itself, in its third year. But UBS thinks the S&P can buck the trend in 2025 and soar to 6,400, implying an upside of 10% from Tuesday’s close.

The bottom line

Despite markets falling Tuesday, there’s still plenty to like about their current state.

Weighed down by ASML’s 16% dive and a report by Bloomberg on potential AI-chip export controls, semiconductor stocks like Nvidia and AMD fell 4.7% and 5.2% respectively. That gave the VanEck Semiconductor ETF its worst day since Sept. 3. As a result, the tech-heavy Nasdaq Composite lost 1.01%.

The Dow Jones Industrial Average, which just yesterday was basking in its accomplishment at closing above the 43,000 level for the first time, fell 0.75% to dip into the 42,000 territory again. UnitedHealth’s 8.1% drop dragged down the Dow.

Last, the S&P 500 retreated 0.76%.

Still, investors are the most bullish in four years, according to the October BofA Global Fund Manager Survey. They’re also optimistic about the economy: 74% investors believe the U.S. will avoid a recession.

Anticipation of more rate cuts by the U.S. Federal Reserve and hopes that Beijing will unleash more stimulus to boost its economy are driving up investor sentiment, according to Michael Hartnett, an investment strategist at BofA.

Indeed, San Francisco Fed President Mary Daly, who’s a member of the Federal Open Market Committee this year, noted that the central bank is “a long way from where [rates are] likely to settle.” That means “the decisions that are really in front of us are ones about how quickly to adjust towards that level” – not whether to keep rates high in light of how strong recent economic data has been.

Another positive sign for markets is how the S&P and Dow hit all-time highs on Monday, but the Nasdaq was still a few percentage points away from its peak. “This subtle divergence is technical evidence that the market has been moving away from the Magnificent Seven mega-caps,” wrote Piper Sandler’s chief market technician Craig Johnson.

– CNBC’s Jeff Cox, Samantha Subin, Yun Li, Lisa Kailai Han and Alex Harring contributed to this story.

Correction: An earlier version of this report misstated the day of U.S. stock movement.

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October 15, 2024

Goldman Sachs to report third-quarter earnings

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David Solomon, Chairman & CEO Goldman Sachs, speaking on CNBC’s Squawk Box at the World Economic Forum Annual Meeting in Davos, Switzerland on Jan. 17th, 2024.

Adam Galici | CNBC

Goldman Sachs is scheduled to report third-quarter earnings before the opening bell Tuesday.

Here’s what Wall Street expects:

Earnings: $6.89 per share, according to LSEG
Revenue: $11.8 billion, according to LSEG
Trading Revenue: Fixed Income of $2.91 billion, Equities of $2.96 billion, per StreetAccount
Investing Banking Revenue: $1.62 billion, per StreetAccount
Asset & Wealth Management: $3.58 billion, per StreetAccount

How much will falling interest rates help Goldman Sachs?

Over the past two years, the Federal Reserve’s tightening campaign has made for a less-than-ideal environment for investment banks like Goldman.

Now that the Fed is easing rates, that positions Goldman to benefit as corporations that have waited on the sidelines to acquire competitors or raise funds begin to take action.

Goldman’s asset and wealth management division is also positioned to benefit from rising asset values across markets as rates decline.

Last week, rival JPMorgan Chase set expectations high with better-than-anticipated results from trading and investment banking, factors that helped the bank top earnings estimates.

Wells Fargo also exceeded estimates on Friday on the back of its investment banking division.

This story is developing. Please check back for updates.

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October 14, 2024

Analysts cheer Wells Fargo to 2018 highs after earnings. We have 1 qualm with the praise

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Wells Fargo stock hit new multi-year highs on Monday after Wall Street analysts praised the bank’s third-quarter earnings report. The news Shares of Club name Wells Fargo jumped more than 3% on Monday — a close above $63 would be the highest finish since January 2018. That’s on top of Friday’s more than 5.6% post-earnings rally, which extended its recent run to six straight sessions. Investors are mulling a slew of positive analysts’ calls after Wells Fargo’s better-than-expected quarterly earnings . While missing on revenue, the bank impressed with a surge in fee-based income streams that offset weakness in other parts of the business. WFC 5Y mountain Wells Fargo 5 years In response, Barclays raised Wells Fargo’s price target to $75 apiece from $66 on Sunday, implying roughly 23% upside from Friday’s prior close. The analysts cited both “increased confidence of a soft landing” and “improvements in operational risk and compliance, which should ultimately lead to [the] removal of its asset cap,” which was imposed by the Federal Reserve in 2018 following misdeeds before Charlie Scharf took over as CEO. Barclays maintained its buy-equivalent rating on the financial name. Piper Sandler hiked its Wells Fargo price target slightly to $62 from $60. “We are keeping our neutral rating, but note that the story becomes more interesting as net interest income begins to find its bottom, the fee base gains momentum, and regulatory issues seem to move forward,” analysts wrote in a Friday note. Big picture Big bank earnings are off to a great start. Not only did Wells Fargo post solid results, but so did JPMorgan Chase . On Friday, the Jamie Dimon-led bank topped analysts’ expectations on earnings and revenue on continued strength in non-interest income streams. Wall Street behemoths including Bank of America, Citigroup and Goldman Sachs are set to post results before Tuesday’s bell. The Club’s other financial name, Morgan Stanley, releases earnings on Wednesday morning. Getting a look at Goldman Sachs’ quarter and then Morgan Stanley should be interesting. Although Jim has previously said the Club would rather be in Goldman than Morgan Stanley, we’re taking a wait-and-see approach to the stock. That’s because Morgan Stanley can turn things around if Wall Street dealmaking picks up and eventually boosts the firm’s investment banking business. Bottom line We’re not surprised that Wells Fargo’s getting the recognition it deserves. After the earnings release. the Club on Friday raised our price target on the bank to $66 per share from $62. We also reiterated our buy-equivalent 1 rating on the stock. “What an amazing quarter,” Jim Cramer said Monday. “Friday was Charlie Scharf’s day.” Similar to the Wall Street analysts, we’re upbeat on the progress Wells Fargo is making toward convincing the Fed to lift the $1.95 trillion asset cap. The removal of this growth lid is crucial to Wells Fargo’s turnaround story and a big reason why the Club invested in the stock in the first place. In fact, in Jim’s Sunday column , he argued that Wells Fargo’s earnings report may be the best of the batch so far. He said he was “astounded that Wells Fargo had been able to start changing its business model to the point where it was more of an investment bank” than previously thought. That’s why we do have one qualm with Piper Sandler’s commentary, in particular. We don’t agree with the research firm’s choice to leave the stock at a hold-equivalent rating. (Jim Cramer’s Charitable Trust is long WFC, MS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Wells Fargo bank signage is seen on Broadway on April 12, 2024 in New York City.

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Wells Fargo stock hit new multi-year highs on Monday after Wall Street analysts praised the bank’s third-quarter earnings report.

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October 14, 2024

CNBC Daily Open: With an unchanged PPI, the Fed’s near the finish line

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A television station broadcasts the Federal Reserve’s interest-rate cut on the floor of the New York Stock Exchange (NYSE) in New York, US, on Wednesday, Sept. 18, 2024.

Michael Nagle | Bloomberg | Getty Images

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Winning week for markets
All major U.S. indexes rose Friday on the back of encouraging inflation data and positive earnings from big banks. That gave them a winning week. Asia-Pacific markets mostly traded higher Monday. China’s Shanghai Composite rose around 2% in choppy trading. Over the weekend, Beijing reported a lower-than-expected consumer inflation rate and producer prices falling for September.

Tesla’s Cybercab and Robovan
Tesla shares slumped 8.8% after the company’s “We, Robot” event disappointed investors. At the Thursday night event, CEO Elon Musk unveiled the Cybercab, a two-seater with no steering wheels or pedals, and the Robovan, an autonomous vehicle that has a big capacity. But Musk offered little other details, causing analysts to cast doubt on the company.

More assurances from China
In a press briefing held Saturday, Chinese Minister of Finance Lan Fo’an told reporters the space for Beijing to increase its budget deficit is “rather large,” but the government is still discussing stimulus plans, according to a CNBC translation of the Chinese. Lan also announced measures to support employment and the real estate industry.

Banks’ earnings in good shape
JPMorgan Chase, the biggest bank in the U.S., reported third-quarter earnings and revenue that beat estimates. Net interest income grew 3% from a year ago and helped revenue to increase 6%. Wells Fargo had a decent third quarter. The bank beat estimates for earnings, but unlike JPMorgan, revenue was below expectations and NII decreased.

[PRO] Earnings will show market direction
After the deluge of data such as September’s jobs reports and consumer price index report, earnings will determine the path of markets for the near term. Big banks dominate third-quarter reports this week. It’s Bank of America and Goldman Sachs’ turn on Tuesday, while Morgan Stanley announces its earnings on Wednesday.

The bottom line

It seems like September’s hotter-than-expected inflation reading was indeed a blip.

With a snap of its fingers, the producer price index assuaged worries over inflation remaining stubborn. The index, which measures wholesale prices – and thus generally prefigures changes in the CPI – was unchanged in September from August, defying expectations from a Dow Jones survey of a 0.1% increase.

In fact, last week’s inflation figures looked so promising that Goldman Sachs think the Federal Reserve has just about brought inflation down to its 2% target without crashing the economy, as CNBC’s Jeff Cox reports.

While consumer sentiment dipped slightly in October, according to the University of Michigan’s Survey of Consumers, “long run business conditions lifted to its highest reading in six months,” wrote Joanne Hsu, the survey’s director.

JPMorgan Chase’s third-quarter earnings may be the first taste of that. The biggest bank in America beat estimates on both revenue and earnings. As banks generally reflect the health of the broader economy, it’s a signal things aren’t all bad despite dipping consumer confidence.

Admittedly, earnings reflect what has already happened. Investors care more about what’s going to happen. But consumers are “fine and on strong footing,” as JPMorgan’s CFO Jeremy Barnum told reporters.

Markets cheered the string of positive news.

On Friday, the S&P 500 added 0.61%, the Dow Jones Industrial Average rose 0.97% and the Nasdaq Composite was up 0.33%.

That capped off a winning week for Wall Street – their fifth in a row. The S&P and Nasdaq climbed 1.1%, while the Dow did a bit better with its 1.2% increase for the week.

“What we’re seeing … is a broadening of the market,” said Craig Sterling, head of U.S. equity research at Amundi US.

It’s a reminder that subduing inflation is just a stop toward investors’ real endgame of a healthy stock market.

– CNBC’s Jeff Cox, Samantha Subin and Brian Evans contributed to this story.

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October 13, 2024

CNBC Daily Open: With a stagnant PPI, the Fed’s nearly at the finish line

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Jerome Powell, chairman of the US Federal Reserve, during the National Association of Business Economics (NABE) annual meeting in Nashville, Tennessee, US, on Monday, Sept. 30, 2024.

Seth Herald | Bloomberg | Getty Images

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Winning week for markets
All major U.S. indexes rose Friday on the back of encouraging inflation data and positive earnings from big banks. That gave them a winning week. Europe’s Stoxx 600 index climbed 0.55% to end the week higher. Separately, in August, the U.K. economy expanded 0.2% on a monthly basis after stagnating in June and July, according to flash data from U.K. officials.

Tesla’s Cybercab and Robovan
Tesla shares slumped 8.8% after the company’s “We, Robot” event disappointed investors. At the Thursday night event, CEO Elon Musk unveiled the Cybercab, a two-seater with no steering wheels or pedals, and the Robovan, an autonomous vehicle that has a big capacity. But Musk offered little other details, causing analysts to cast doubt on the company.

More assurances from China
In a press briefing held Saturday, Chinese Minister of Finance Lan Fo’an told reporters the space for Beijing to increase its budget deficit is “rather large,” but the government is still discussing stimulus plans, according to a CNBC translation of the Chinese. Lan also announced measures to support employment and the real estate industry.

Banks’ earnings in good shape
JPMorgan Chase, the biggest bank in the U.S., reported third-quarter earnings and revenue that beat estimates. Net interest income grew 3% from a year ago and helped revenue to increase 6%. Wells Fargo had a decent third quarter. The bank beat estimates for earnings, but unlike JPMorgan, revenue was below expectations and NII decreased.

[PRO] Earnings will show market direction
After the deluge of data such as September’s jobs reports and consumer price index report, earnings will determine the path of markets for the near term. Big banks dominate third-quarter reports this week. It’s Bank of America and Goldman Sachs’ turn on Tuesday, while Morgan Stanley announces its earnings on Wednesday.

The bottom line

It seems like September’s hotter-than-expected inflation reading was indeed a blip.

With a snap of its fingers, the producer price index assuaged worries over inflation remaining stubborn. The index, which measures wholesale prices – and thus generally prefigures changes in the CPI – was unchanged in September from August, defying expectations from a Dow Jones survey of a 0.1% increase.

In fact, last week’s inflation figures looked so promising that Goldman Sachs think the Federal Reserve has just about brought inflation down to its 2% target without crashing the economy, as CNBC’s Jeff Cox reports.

While consumer sentiment dipped slightly in October, according to the University of Michigan’s Survey of Consumers, “long run business conditions lifted to its highest reading in six months,” wrote Joanne Hsu, the survey’s director.

JPMorgan Chase’s third-quarter earnings may be the first taste of that. The biggest bank in America beat estimates on both revenue and earnings. As banks generally reflect the health of the broader economy, it’s a signal things aren’t all bad despite dipping consumer confidence.

Admittedly, earnings reflect what has already happened. Investors care more about what’s going to happen. But consumers are “fine and on strong footing,” as JPMorgan’s CFO Jeremy Barnum told reporters.

Markets cheered the string of positive news.

On Friday, the S&P 500 added 0.61%, the Dow Jones Industrial Average rose 0.97% and the Nasdaq Composite was up 0.33%.

That capped off a winning week for Wall Street – their fifth in a row. The S&P and Nasdaq climbed 1.1%, while the Dow did a bit better with its 1.2% increase for the week.

“What we’re seeing … is a broadening of the market,” said Craig Sterling, head of U.S. equity research at Amundi US.

It’s a reminder that subduing inflation is just a stop toward investors’ real endgame of a healthy stock market.

– CNBC’s Jeff Cox, Samantha Subin and Brian Evans contributed to this story.

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October 13, 2024

Earnings will drive the stock market in the week ahead. That’s a good thing

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The good times are still rolling on Wall Street. An intensifying earnings season will put that momentum to the test. The S & P 500 ended Friday at a record high, buoyed by strong quarterly results from Club holding Wells Fargo and other major financial firms, which reinforced the idea of a healthy U.S. economy. The index posted its fifth positive week in a row, advancing 1.1%. Meanwhile, the Dow Jones Industrial Average rose 1.2% in the week and also closed Friday at an all-time high. The tech-heavy Nasdaq Composite gained 1.1% and now sits just 1.6% below its July peak. The third-quarter earnings calendar starts to get crowded in the coming days, featuring more major U.S. banks, health-care heavyweights and a few industrial and tech players. All eyes will be on the numbers and what executives have to say on their outlooks — just as it should be, according to Jim Cramer. When consumer price index for September came in a bit hotter than expected Thursday morning , Jim cautioned investors against sweating every line in every economic report. Keep your “eye on the prize,” he said. Right now, he said, that prize is “companies which are about to have earnings.” The high-level takeaway from the economic data in recent days is what matters most: Inflation is broadly trending down. The CPI in September showed an annual inflation rate of 2.4%, slightly above consensus but below the 2.5% figure seen in August. In Friday’s look at wholesale inflation, the producer price index was unchanged month over month . Economists had expected a 0.1% monthly gain. As the market marched back to records, we mostly sat tight. Exiting Procter & Gamble on Tuesday was our lone trade of the week. Simply put: a defensive stock like the maker of Crest toothpaste and Dawn soap didn’t seem right for the portfolio as the Federal Reserve embarks on an easing cycle and the economy remains on solid ground. Wells Fargo and JPMorgan reinforced that notion Friday with their earnings reports. Shares of both banks surged — Wells up 5.6%, JPMorgan up 4.4% — and helped the financial sector climb the S & P 500 leaderboard for the week. Tech led the way, up 2.5%, followed by industrials and financials, which added 2.1% and 1.8%, respectively. Utilities and communication services were the main laggards, losing 2.6% and 1.4%, respectively. In the week ahead, a number of influential companies are set to report including UnitedHealth and Goldman Sachs on Tuesday. ASML on Wednesday and Taiwan Semiconductor Manufacturing Co . on Thursday will provide a glimpse at the state of the AI trade before the megacap tech companies report later in the month and beyond. We’ll hear from Club holdings Morgan Stanley and Abbott Laboratories on Wednesday morning. Morgan Stanley: The ongoing recovery in investment banking will be front and center. That was a key theme in the second quarter , and the hope is that the July-to-September period showed a continuation of the trend for Morgan Stanley. An encouraging sign arrived Friday, with JPMorgan reporting a better-than-expected number for its investment banking segment. Shares of Morgan Stanley had suffered through a period of underperformance, leading Jim to openly question whether owning rival Goldman Sachs was a better idea. Morgan Stanley has been strong lately, though. The stock is up more than 14% over the past month and closed Friday at a record $110.91 a share. Morgan Stanley’s results Wednesday should hopefully add more clarity on our next move. Indications that its growing wealth management segment has found its footing would be welcome news. Abbott Labs: The medical products maker’s legal fight over its premature infant formula looks more manageable after a trio of U.S. health agencies recently pushed back against claims that formulas like Abbott’s cause an intestinal illness commonly abbreviated as NEC. To be sure, a second trial on the matter is ongoing in St. Louis, so Abbott Labs is not out of the woods just yet. Nevertheless, agencies including the Food and Drug Administration lending their support to the formulas is a big deal. “You clean up the lawsuits, [the stock] goes to $125,” Jim predicted Friday. The reason it would be so positive? Abbott’s strong fundamentals have been obscured by the legal issues. On that front, we’ll be looking for updates on the U.S. launch of Abbott’s over-the-counter continuous glucose monitoring systems and the state of its medical devices business overall. Weak points in the second quarter were nutrition and established pharmaceuticals, but even with them, Abbott has reported back-to-back beat-and-raise quarters. A third would be nice. Week ahead Monday, Oct.14 Before the bell: Charles Schwab (SCHW) Tuesday, Oct. 15 Before the bell: Walgreens Boots Alliance (WBA), UnitedHealth (UNH), Citigroup (C), Bank of America (BAC), Johnson & Johnson (JNJ) and Goldman Sachs (GS) After the bell: United Airlines (UAL), Interactive Brokers (IBKR) and JB Hunt (JBHT) Wednesday, Oct.16 Before the bell: Morgan Stanley (MS), Abbott Labs (ABT), ASML (ASML), US Bancorp (USB), Citizens (CFG) and Prologis (PLD) After the bell: Alcoa (AA), PPG Industries (PPG), CSX (CSX), Kinder Morgan (KMI), Discover (DFS) and Crown Castle (CCI) Thursday, Oct. 17 8:30 a.m. ET: Initial Jobless Claims 8:30 a.m. ET: Retail Sales 8:30 a.m. ET: Industrial Production & Capacity Utilization Before the bell: Taiwan Semi (TSM), Travelers (TRV), Elevance (ELV), Huntington Bancshares (HBAN), Blackstone (BX), Truist (TFC) and KeyCorp (KEY) After the bell: Netflix (NFLX), Intuitive Surgical (ISRG) and Crown Holdings (CCK) Friday, Oct. 18 8:30 a.m. ET: Housing Starts & Building Permits Before the bell: American Express (AXP), SLB (SLB) and Procter & Gamble (PG) (Jim Cramer’s Charitable Trust is long WFC, MS and ABT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

A view of the New York Stock Exchange building in the Financial District in New York City on Aug. 5, 2024.

Charly Triballeau | Afp | Getty Images

The good times are still rolling on Wall Street. An intensifying earnings season will put that momentum to the test.

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October 13, 2024

JPMorgan Chase is set to report third-quarter earnings – here’s what the Street expects

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CEO of Chase Jamie Dimon looks on as he attends the seventh “Choose France Summit”, aiming to attract foreign investors to the country, at the Chateau de Versailles, outside Paris, on May 13, 2024.

Lucovic Marin | Getty Images

JPMorgan Chase is scheduled to report third-quarter earnings before the opening bell Friday.

Here’s what Wall Street expects:

Earnings: $4.01 a share, according to LSEG
Revenue: $41.63 billion, according to LSEG
Net interest income: $22.73 billion, according to StreetAccount
Trading Revenue: Fixed income of $4.38 billion, Equities of $2.41 billion, according to StreetAccount

JPMorgan will be watched closely for clues on how banks are faring at the start of the Federal Reserve’s easing cycle.

The biggest American bank has thrived in a rising rate environment, posting record net income figures since the Fed started hiking rates in 2022.

Now, with the Fed cutting rates, there are questions as to how JPMorgan will navigate the change. Like other big banks, it’s margins may be squeezed as yields on interest-generating assets like loans fall faster than its funding costs.

Last month, JPMorgan dialed back expectations for 2025 net interest income and expenses, and analysts will want more details on those projections.

Analysts will also want to hear JPMorgan CEO Jamie Dimon’s thoughts about the upcoming U.S. election and the industry’s efforts to push back against an array of regulatory moves to rein in fees and force banks to hold more capital.

Shares of JPMorgan have jumped 25% this year, exceeding the 20% gain of the KBW Bank Index.

Wells Fargo is scheduled to release results later Friday, while Bank of America, Goldman Sachs, Citigroup and Morgan Stanley report next week.

This story is developing. Please check back for updates.

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October 10, 2024

These cheap stocks are outperforming, and analysts give 5 more than 20% upside

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October 9, 2024

Wall Street giants like Goldman quickly up their bets on Chinese markets amid stimulus promises

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October 7, 2024

An analyst upgraded Morgan Stanley to a buy. Why we’re not ready to follow suit

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Newfound optimism on Morgan Stanley helped its stock close Friday’s session at its highest level of the year. Jim Cramer is still unsure what the Club’s next move should be. Morgan Stanley’s persistent underperformance has made the stock one of our thornier positions — so much so that Jim has openly considered dumping it for investment banking rival Goldman Sachs . Dealmaking activity has picked up, but it’s not been enough to fully unlock Morgan Stanley shares. That is in large part because the bank’s wealth management division has failed to impress. Analysts at HSBC see better days ahead for Morgan Stanley and in a note to clients late Thursday upgraded the stock to a buy rating from hold, arguing its “long period of underperformance could be ending.” Among the reasons for the call: A healthy market backdrop should support the financial performance of both its investment banking and wealth management operations, analysts said. They added that negative sentiment around the stock more generally also seems to have bottomed. Shares of Morgan Stanley rose more than 3% Friday, to $107.88 each, helped by both HSBC’s upgrade and better-than-expected jobs data , which lifted the entire banking sector higher, including fellow portfolio name Wells Fargo . Morgan Stanley ended Friday within a dollar of its all-time closing high of $108.73 reached back in February 2022. Still, the stock is up only 15.7% year to date and 36.4% over the past 12 months, lagging behind the KBW Bank Index , which has climbed 19.4% and 52.6%, respectively, over those timeframes. For its part, Goldman Sachs has jumped 28.4% so far in 2024 and 60.5% in the past year. Friday’s positive developments are welcome news – but not enough to add clarity on our path forward for Morgan Stanley. We’re maintaining our hold-equivalent 2 rating on the stock. “Candidly, I think that [Morgan Stanley] is not priced for a good IPO market and [Goldman Sachs] is,” Jim said Friday. “The reason for that is because I think that people believe the wealth advisory business isn’t doing as well as it can be and the E-Trade buy seems to not be working out,” Jim said, referring to Morgan Stanley’s $13 billion acquisition of the brokerage firm in 2020. “We still do not have answers for that so I can’t say that we are going to upgrade.” However, there’s hope Morgan Stanley’s stock can climb higher if its sizable investment banking business continues its recovery. In order for that to happen, there must be a more meaningful resurgence in initial public offerings (IPO) and mergers and acquisitions (M & A) after more than two downbeat years for both dealmaking markets. Banks like Morgan Stanley and Goldman Sachs have long relied on fee-based revenues from deals. The more activity there is, the more fees available for them to collect. The nascent rebound has already showed up in Morgan Stanley’s results. In the second quarter, revenue for the firm’s investment banking segment surged 51% year over year. Meanwhile, advisory and equity underwriting fees both increased 30% and 56%, respectively, over the same period. The environment for deals is not back to normal just yet, though. During an industry conference in September, Morgan Stanley co-president Dan Simkowitz said that M & A and IPOs will likely remain below trend through year-end. To be sure, the executive also forecasted that this activity would accelerate in 2025 as the Federal Reserve’s interest rate-cutting efforts ripple through the economy. Morgan Stanley’s wealth management franchise — a major growth priority for the bank — is a lingering concern after a miss on revenues last quarter, which caused the stock to briefly sink. Meanwhile, Goldman Sachs beat analysts’ expectations for revenues in wealth. Morgan Stanley’s quarterly results on Oct. 17 will provide an important look at whether this challenged part of its business is showing any reason for optimism. For the time being, the Club is taking a wait-and-see approach with Morgan Stanley stock. If there is a surge in IPO and M & A activity that HSBC forecasted, Morgan Stanley is well-positioned to benefit. “If we get deals, [Morgan Stanley] will be a good place to be,” Jim said. (Jim Cramer’s Charitable Trust is long MS, WFC. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Bing Guan | Bloomberg | Getty Images

Newfound optimism on Morgan Stanley helped its stock close Friday’s session at its highest level of the year. Jim Cramer is still unsure what the Club’s next move should be.

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October 5, 2024

What a resurgence in Wall Street dealmaking means for Morgan Stanley and Wells Fargo

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Great news for Club stocks Wells Fargo and Morgan Stanley : The rebound in investment banking isn’t over yet. The catalyst? Dealmaking is expected to continue to rise as the Federal Reserve delivers more interest rate cuts. This should, in turn, boost revenues for a key business within both Wall Street firms. We’ll find out to what extent when Wells Fargo reports earnings on Oct. 11 and Morgan Stanley delivers quarterly results on Oct. 16. Lower borrowing costs tend to spur mergers and acquisitions (M & A) and initial public offerings (IPO), which means more business for the banks. Recent numbers from consulting firm KPMG and financial data provider S & P Global Market Intelligence indicate a solid pickup in activity for M & A and IPOs already. So far in 2024, mergers and acquisitions transaction values and money raised from initial public offerings are largely outperforming all of last year’s lackluster activity. U.S. mergers and acquisitions rose 37% to $1.3 trillion in the first nine months of 2024 compared to the same period a year ago, according to KPMG, citing data through Sept. 15. Global M & A transaction values so far this year of roughly $2 trillion have already beat 2023’s total of $1.6 trillion, according to S & P Global data captured on Oct. 1. The IPO market has improved, too. According to KPMG, public offerings listed in the U.S. raised $28.3 billion during the first nine months of 2024. That’s up 50% year over year. All of this bodes well for the kind of advisory and underwriting fees that investment banks can charge to facilitate these deals. To be sure, M & A and IPO values are still down significantly from their Covid peaks in 2021 after the Fed delivered two emergency rate cuts in March 2020 that took the cost of borrowing to near zero. Rates remained that way until March 2022 when central bankers started their tightening cycle to fight inflation. The Fed hiked rates 11 times over 18 months before cutting rates by 50 basis points last month. Speaking at a National Association for Business Economics event in Nashville, Tennessee, Fed Chairman Jerome Powell said Monday that he expects an additional 50 basis points worth of rate cuts this year — 25 in November and 25 in December. The market is not quite ready to take Powell at his word. As of Tuesday, the CME FedWatch tool was putting roughly 66% odds on a 50 basis point cut in December. Rebecca Brokmeier, group head of KPMG’s investment banking platform, sees “an increase in new deals in the market in the fourth calendar quarter and expects this trend to continue as we move into 2025” while the Fed continues to lower rates. Brokmeier told CNBC Tuesday that a lot of this activity is expected to be driven by private equity, which is “more reliant on low interest rates for transactions than corporations and have record levels of dry powder to deploy as well as long-held assets that must be exited in order to return cash to their investors.” MS YTD mountain Morgan Stanley (MS) year-to-date performance For Morgan Stanley, a resurgence in its investment banking division is crucial to our investment thesis and why we stuck with it. Following nearly two downbeat years, we saw reason to be optimistic about Morgan Stanley’s IB business last quarter, which was out in July. IB segment revenue jumped 51%. Breaking IB down further, advisory and equity underwriting fees both surged 30% and 56%, respectively, from the prior year. Last month, however, Jim Cramer criticized the stock’s underperformance , adding that he was considering exiting Morgan Stanley and swapping in investment banking rival Goldman Sachs , where he used to work during his days on Wall Street. Part of that underperformance came after co-president Dan Simkowitz said that M & A and IPOs will remain below trend for the rest of 2024 at an industry conference. To be sure, he also predicted that this activity would accelerate in 2025 as the Fed lowers rates. “Morgan Stanley is in no man’s land, too low to sell and too high to buy. That means wait, which is exactly what we are doing,” Jim said during the Club’s Monthly Meeting on Sept. 12, two days after Simkowitz’s comments. “It might be time to say goodbye and pick up some of the much better run Goldman Sachs.” A week later, Morgan Stanley stock rose on the Fed rate cut, and the Club settled for trimming the position . Morgan Stanley has diversified its portfolio and moved more heavily into wealth management in recent years to reduce its exposure to the volatility of the IB business. So, it remains to be seen how investment banking performance fits into the whole profit picture. WFC YTD mountain Wells Fargo (WFC) year-to-date Morgan Stanley’s IB business is much larger than Wells Fargo’s. However, Wells Fargo, known for its roots as a traditional money center bank, has been working diligently to build out its dealmaking side of the shop. It’s kind of the opposite of Morgan Stanley. Wells Fargo, which has a strong wealth management franchise, is branching out to take a slice of the IB pie. Wells has made a series of senior-level hires in recent years to expand its corporate and investment banking (CIB) division. This helps the bank rely less on interest-based incomes from its consumer lending business, which have been long at the mercy of the Fed’s monetary policy decisions. We’ve seen positive signs already, as CIB revenue jumped 38% year over year in the July quarter. “We continued to see growth in our fee-based revenue offsetting an expected decline in net interest income,” Wells Fargo CEO Charlie Scharf said during the July 12 earnings call. “The investments we have been making allowed us to take advantage of the market activity in the quarter with strong performance in investment advisory, trading and investment banking fees.” In another positive development in Scharf’s bid to clean up the bank’s past missteps and get regulatory permission to expand, Bloomberg News reported last week that Wells Fargo submitted a third-party review of its risk and control overhauls to the Fed in an effort to get the central bank-mandated $1.95 trillion asset cap removed. The restriction was put in place by the Fed in 2018 after a series of scandals under previous leadership. (Jim Cramer’s Charitable Trust is long WFC, MS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Federal Reserve Chairman Jerome Powell speaks during a news conference following the September meeting of the Federal Open Market Committee at the William McChesney Martin Jr. Federal Reserve Board Building on September 18, 2024 in Washington, DC.

Anna Moneymaker | Getty Images

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October 2, 2024

Wall Street hovers near record highs. Here’s why we want to see choppiness

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September 23, 2024

We’re trimming a bank stock on a post-Fed pop and still considering swapping it for another

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September 19, 2024

Here’s what Morgan Stanley, Wells Fargo stand to gain from lower interest rates

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Big Wall Street banks and interest rates have a complicated relationship. As the Federal Reserve on Wednesday afternoon embarks on easing monetary policy, banks are hoping for a more normalized bond market yield curve, with a wider spread between the short end and the long end. Banks make interest income by paying for deposits at a lower rate and lending at a higher rate. They also make money on fee-based services in businesses that pick up when rates are lower. “These banks are pretty sophisticated,” Erica Groshen, former New York Fed vice president, told CNBC in an interview. “They have been managing their risk all along knowing that eventually, interest rates were going to come down.” Groshen, a senior economic advisor at Cornell University, added, “The Fed has been doing a pretty amazing job of getting very close to a soft landing” as a stable economy can lift all boats. On the interest side, banks pull levers and push buttons to make the best of any rate environment. But the clearest line of sight to the benefits of lower rates is in investment banking because cheaper borrowing costs tend to encourage more mergers and acquisitions and initial public offerings. Banks take fees from clients putting together deals and taking their companies public. For Morgan Stanley , a rebound in capital markets is crucial to the Club’s investment thesis. While diversifying in recent years to become less dependent on investment banking, it’s still a big part of the business. When the Fed started hiking rates in March 2022, M & A and IPO activity grounded to a halt. Would-be clients sought to conserve capital on concerns about a recession. Dealmaking, however, has picked up this year on the prospects of lower rates. The Club has stayed with Morgan Stanley on expectations that its investment banking outfit will flourish again. MS YTD mountain Morgan Stanley (MS) year-to-date performance There has been some progress so far. Morgan Stanley was tapped for high-profile deals like Reddit’s IPO in March. Investment banking, which falls under Morgan Stanley’s Institutional Securities, accounts for roughly 46% of overall revenue. The division handily beat on second-quarter revenue . Morgan Stanley’s IB revenue increased 53% year-over-year, while advisory fees and equity underwriting fees jumped more than 30% and 56%, respectively. Still, Jim Cramer recently said there have not been enough signs of a recovery at Morgan Stanley. The stock’s underperformance compared to peers and the market has disappointed him. Shares of Morgan Stanley are up 7% year to date, versus the KBW Bank Index ‘s nearly 17% gain and the S & P 500 ‘s 18% advance in 2024. Jim has said he’s considering swapping Morgan Stanley for his old shop Goldman Sachs . “Morgan Stanley is in no man’s land, too low to sell and too high to buy. That means wait, which is exactly what we are doing,” he said during last week’s September Monthly Meeting. “That said, I think we have battled enough.” At Wells Fargo , the Club’s other financial name, lower rates should help its burgeoning investment banking business. While known as a traditional money center bank, CEO Charlie Scharf has been diversifying the firm’s business mix. Wells Fargo shares year-to-date have performed better than Morgan Stanley, gaining 11%. However, the stock was still trailing KBW and the S & P 500 over the same stretch. WFC YTD mountain Wells Fargo (WFC) year-to-date performance The Corporate and Investment Banking division makes up 23% of overall revenue. However, management has made significant strides to expand CIB through a slew of senior hires. These investments are helping Wells Fargo to rely less on interest-based revenue streams, which are at the mercy of the Fed’s policy rather than management’s own strategy. “Wells is doing incredibly well and I think that CEO Charlie Scharf has a winning formula for when rates go down,” Jim said, referencing the firm’s CIB expansion. Investment banking at Wells Fargo houses its Commercial Real Estate portfolio — once one of the largest among big banks. The estimated $21 trillion CRE sector has experienced mounting troubles due to higher vacancy rates and higher odds of delinquencies. However, with rates coming down, Wells Fargo’s CRE exposure becomes less of a concern for investors because cheap borrowing costs lead to more property sales and rentals. To be sure, Wells Fargo management said during July’s second-quarter earnings call that the bank will continue to de-risk its office portfolio. (Jim Cramer’s Charitable Trust is long WFC, MS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Federal Reserve Bank Chair Jerome Powell announces that interest rates will remain unchanged during a news conference at the bank’s William McChesney Martin building on May 01, 2024 in Washington, DC.

Chip Somodevilla | Getty Images

Big Wall Street banks and interest rates have a complicated relationship.

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September 18, 2024

Tag: Goldman Sachs Group Inc

Don’t miss these insights from CNBC PRO

Don’t miss these insights from CNBC PRO