Banking stocks and United Airlines: what’s happened on the US market this week

As the US government shutdown entered its second week, there was little in the way of macro-economic news apart from the release of the Federal Reserve’s Beige Book.

The Beige Book is a qualitative assessment of economic conditions, published eight times a year and the latest report showed US economic activity was flat in recent weeks with overall consumer spending edging down.

Speaking at the 67th annual meeting of the National Association of Business Economics in Philadelphia, Fed chair Jerome Powell reiterated his view that the Fed is more concerned by the labour market than inflation.

‘Rising downside risks to employment have shifted our assessment of the balance of risks,’ said Powell, leaving little doubt about another rate cut at the next Fed meeting on 29 October.

The prospect of lower interest rates spurred on small caps which helped push the Russell 2000 index to a new high, while the large cap indices lagged.

Semiconductor stocks were in demand following better than expected third quarter bookings and profit from ASML, the world’s largest supplier of chip-making equipment.

Shares in regional banks were weak after Zions Bancorp revealed an unexpected loss on two loans and Western Alliance alleged a borrower had committed fraud.

These events followed quickly on the heels of the bankruptcy of auto parts maker First Brands and auto dealer Tricolor, raising market concerns about poor risk management and loose lending standards in the US banking sector.

Investment banks

Banking group JPMorgan kicked off the US reporting season with earnings ahead of analysts’ expectations.

With stock markets trading near all-time highs and mergers and acquisitions on the rise, JPMorgan saw strong growth from investment banking fees and equity trading income.

For context, the value of global M&A deals topped $1 trillion in the third quarter for only the second time on record, according to data compiled by Bloomberg.

Equity and fixed income trading revenues at JPMorgan and Morgan Stanley increased by over a third, driven by strength in their prime brokerage businesses.

Morgan Stanley Chief Financial Officer Sharon Yeshaya told analysts: ‘Prime brokerage revenues drove results as average client balances and financing revenues reached new records.’

Traditional lending was solid across the sector but suggested moderating growth, while consumer spending on credit and debit cards showed no sign of slowdown, at least among higher earners.

While banks reported signs of stress among lower income consumers, provisions for bad debts and loan losses remained modest.

JPMorgan CEO Jamie Dimon stuck a cautious tone on the corporate credit outlook after the bank took a $170 million charge related to its exposure to bankrupt auto dealer Tricolor.

United Airlines

Chicago-based United Airlines released better than expected third quarter earnings and projected record fourth quarter revenue on continuing robust demand for premium travel.

The report comes a week after rival Delta Air Lines also projected a record December quarter.

United’s third quarter adjusted earnings per share came in above the top end of guidance at $2.78, beating analysts’ expectations of $2.63. Revenue ticked up 2.6% year-on-year to $15.23 billion, just shy of the $15.33 billion forecast by analysts.

Growth was strongest in the premium and frequent flyer segments which grew 6% and 9% respectively, while revenue from basic economy grew by 4% year-on-year.

‘This great momentum has continued so far in the fourth quarter, and we expect the fourth quarter of 2025 to have the highest total operating revenue for a single quarter in company history,’ the company said.

The shares fell around 6% on possible profit taking by investors. Over the past year the shares have increased by 33% compared with a 13% gain in the S&P 500 index.

Bunge

US grain trader Bunge jumped 12% on 15 October, registering a new high for the year, despite the company lowering its 2025 adjusted earnings per share forecast.

UBS analyst Manav Gupta said the rally in the shares suggested investors had expected a worse outlook.

Bunge now expects 2025 adjusted EPS to be in the range of between $7.30 and $7.60, down from a previous projection of $7.75.

The revised projection reflects share dilution from the $34 billion merger with Glencore-backed Viterra in July.

The merger with Viterra creates a global crop trading operation with the scale to rival Archer Daniels Midland and privately-owned Cargill.