U.S. stock markets displayed a mixed performance on Wednesday, reflecting ongoing concerns over U.S.-China trade tensions even as optimism surrounding potential interest rate cuts and solid earnings from major Wall Street banks provided some support. The Dow Jones Industrial Average closed nearly flat, while the S&P 500 gained 0.4% and the Nasdaq Composite increased by 0.7%. All three indices, which previously exhibited stronger gains, lost momentum as the session progressed, continuing the trend of market volatility seen earlier in the week.
The day began positively, buoyed by a robust start to earnings season, particularly from major banks. Bank of America reported a staggering 23% rise in profits, benefiting from heightened deal activity over the summer, while Morgan Stanley’s profits surged by 45% in what its CEO characterized as an “outstanding” quarter. These developments provided a counterweight to investor unease stemming from persistent U.S.-China trade frictions and an ongoing U.S. government shutdown.
Federal Reserve Chair Jerome Powell’s comments further influenced market sentiment, as he indicated that “downside risks to employment appear to have risen.” His remarks led investors to increase their expectations for interest rate cuts, particularly given the current delays in economic data releases caused by the federal government shutdown. The likelihood of a rate cut later this month is now seen as almost certain, with December rate cut odds climbing to approximately 96%.
However, U.S.-China trade tensions remained in focus after President Trump suggested an embargo on several Chinese products, including cooking oil, in retaliation for China’s reduction in soybean purchases. This came on the heels of Chinese sanctions targeting U.S. subsidiaries of South Korean shipbuilder Hanwha, escalating market apprehensions.
Treasury Secretary Scott Bessent expressed a more optimistic outlook, mentioning plans for Trump to meet with Chinese leader Xi Jinping later this month and hinting at the possibility of extending a tariff pause, despite criticizing China’s recent trade actions.
Meanwhile, the ongoing government shutdown is expected to continue affecting various federal programs, with the White House budget office searching for solutions to ensure military personnel and law enforcement receive their payments.
In the stock market, Progressive’s shares tumbled over 6% after the insurance firm reported third-quarter earnings that fell below analysts’ expectations, attributing a substantial profit decline to a new Florida policy change impacting auto insurance profits.
Contrasting with Progressive’s struggles, cryptocurrencies faced a challenging session, with Bitcoin losing ground amid heightened caution from investors. The world’s largest cryptocurrency had initially rallied in October but was unable to maintain those gains, hovering below $112,000. This decline shifted investor capital toward gold, which surged to new highs above $4,200 per troy ounce as economic uncertainties intensified.
On the tech front, AMD saw positive momentum as its stock jumped 8% in midday trading following analyst upgrades and an important agreement to supply Oracle with AI chips. Regional bank stocks such as Citizens Financial and PNC declined after reporting weaker-than-expected earnings, emphasizing a divide between the larger Wall Street banks and regional financial institutions.
Additionally, the U.S.-China trade conflict positively impacted certain Australian stocks, specifically cooking oil producer Australian Oilseeds, whose shares soared roughly 260% amid threats from President Trump to curtail business with China.
In summary, U.S. markets experienced a volatile day fueled by positive bank earnings, ongoing trade tensions, and mixed sentiments surrounding interest rate policy, while gold continued to attract investors seeking stability amid market fluctuations.
