Wall Street mixed as bank earnings lift Goldman, Iran war and inflation weigh

Wall Street stocks traded mixed on Tuesday as investors assessed a fresh batch of corporate earnings, with strong results from major US banks offset by concerns over market volatility, inflation and the economic fallout of the Iran war.The S&P 500 slipped 0.1 per cent, while the Dow Jones Industrial Average fell 190 points, or 0.4 per cent, and the Nasdaq Composite declined 0.2 per cent. The moves came as the benchmark indexes remained close to their record levels, with investors weighing whether companies can sustain their profit growth amid rising borrowing costs and geopolitical uncertainty.Goldman Sachs shares recovered to trade 0.3 per cent higher after initially jumping more than 4 per cent following a stronger-than-expected quarterly profit. The bank benefited from robust equities trading, although revenue from its fixed income, currencies and commodities business fell 1 per cent from a year earlier.Chief executive David Solomon said the economy remained resilient despite several headwinds. "The economy continues to be very, very resilient despite some of the headwinds," he said, pointing to a strong technology investment cycle and a regulatory environment encouraging corporate activity.Banking activity faces late-quarter slowdownResults from JPMorgan Chase, Citigroup, Goldman Sachs and Wells Fargo indicated that the dealmaking and trading momentum seen in the first half of the year may have moderated towards the end of the third quarter. Executives cited volatile equity markets, rising bond yields and uncertainty surrounding the economic outlook as factors weighing on investment banking activity.JPMorgan said market turbulence had slowed dealmaking and affected bond trading, particularly during the second half of September. However, chief financial officer Jeremy Barnum said the pipeline of potential deals remained "very strong", with many transactions delayed rather than cancelled.Goldman Sachs chief Solomon also expressed optimism about future activity, saying the initial public offering (IPO) market remained in good shape despite a recent loss of momentum. Companies could postpone listings until market conditions improve, he said.Citigroup chief financial officer Gonzalo Luchetti reported softer investment banking activity during the quarter, while Wells Fargo finance chief Mike Santomassimo also pointed to a slowdown in September as benchmark bond yields rose sharply."There is no doubt that high interest rates and the threat of continued Fed hikes is weighing on trading and IB activity in a measurably negative vector," said Brian Mulberry, chief market strategist at Zacks Investment Management.Trading revenue supports bank earningsEquities trading remained a bright spot for major banks as clients adjusted their portfolios amid uncertainty over interest rates and rising energy prices. JPMorgan reported a 15 per cent increase in revenue from its markets division in the third quarter compared with a year earlier, while equities markets revenue surged 49 per cent.Goldman also exceeded analysts' profit expectations, supported by stronger equities trading linked to volatility surrounding the Middle East conflict. Its fixed income, currencies and commodities business, however, recorded a year-on-year decline in revenue.JPMorgan shares rose 0.1 per cent after fluctuating between gains and losses, while Wells Fargo fell 1.8 per cent following weaker-than-expected revenue despite beating profit estimates. Citigroup shares also declined, while Goldman Sachs ended in positive territory.JPMorgan chief executive Jamie Dimon flagged elevated asset prices, persistent inflation, higher interest rates and geopolitical tensions as risks to the economic outlook. "These forces may be manageable, but we remain prepared for a wide range of outcomes," he said.Despite these concerns, bank executives said consumers and corporate borrowers remained resilient, with limited signs of deterioration in credit quality. Santomassimo said Wells Fargo was not seeing indications of significant financial stress among borrowers.Markets weigh earnings against wider risksBeyond the banking sector, technology stocks remained under pressure amid concerns about valuations and competition in the artificial intelligence industry. Micron Technology fell 5.1 per cent after reports that Chinese memory-chip maker CXMT was making advances that could challenge established players, including Micron, Samsung Electronics and SK Hynix. South Korea's Kospi index dropped 5.5 per cent.Bumble shares surged 56.2 per cent after the dating-app company agreed to a $1.3 billion all-cash buyout by Ithaca Holdings.In the bond market, the yield on the US 10-year Treasury eased to 5.22 per cent from 5.24 per cent late Friday, while oil prices declined. Brent crude fell 0.5 per cent to $106.11 a barrel as uncertainty over the Iran war continued to influence energy markets.The broader earnings outlook remains strong, with analysts forecasting nearly 30 per cent year-on-year profit growth for S&P 500 companies in the third quarter, according to FactSet. However, investors remain focused on whether corporate results can justify elevated stock valuations amid inflationary pressures, rising bond yields and geopolitical risks.Chris Kotowski, an analyst at Oppenheimer & Co, cautioned that much of the banks' earnings outperformance appeared to be concentrated in equities trading, raising questions about whether the gains could be sustained.You use AI every day. Now get your AI Quotient. Take the AIQ test.