Earnings live: United Airlines stock rises on earnings beat; shares of Bank of America, Morgan Stanley, LVMH, and ASML gain

The Q3 earnings season commenced with major Wall Street banks, including Morgan Stanley and Citigroup, reporting strong results driven by robust trading and dealmaking, which contrasted with declines in several regional bank stocks despite some beating estimates. While S&P 500 earnings are projected for positive growth, analysts anticipate actual double-digit expansion due to typical upside surprises. Notable individual reports include Progressive's significant earnings miss stemming from a Florida policy change, Johnson & Johnson's raised guidance and planned orthopedics spin-off, and LVMH's unexpected return to sales growth.

Analysis

S&P 500 Q3 earnings are projected to show an 8% year-over-year growth, with analysts anticipating a double-digit actual growth rate, potentially 13%, given historical upside surprises. Major Wall Street banks, including Morgan Stanley and Citigroup, reported robust Q3 results, benefiting significantly from a dealmaking boom and strong trading activity. Morgan Stanley's profits surged 45% with dealmaking fees up 44% and trading fees up 24%, while Citigroup saw a 9% revenue increase and a 17% jump in dealmaking fees.

In contrast, several regional bank stocks experienced declines, with First Horizon dropping over 10% due to a $52 million year-over-year deposit decrease, and PNC falling over 3% despite beating earnings estimates. This performance divergence underscores differing market dynamics between large, diversified financial institutions and their regional counterparts.

Individual corporate results presented a mixed picture: Progressive's stock tumbled over 6% following a significant earnings miss and a 48% net income drop, attributed to a $950 million expense from a Florida policy change. Conversely, Johnson & Johnson raised its 2025 sales forecast and announced plans to spin off its orthopedics unit, while Domino's Pizza saw its stock climb nearly 5% on strong US same-store sales growth and an earnings beat.

LVMH unexpectedly returned to sales growth, indicating easing luxury demand concerns, with its stock jumping up to 14%. Abbott Laboratories reported diluted EPS below estimates, though medical device sales grew 14.8%, offsetting declines in US nutrition and diagnostics. ASML reported orders topping estimates driven by AI investments, but warned of a significant drop in Chinese demand next year.

Key Decisions for Investors

• Investors should consider overweighting major Wall Street banks given their strong Q3 performance driven by dealmaking and trading.
• Exercise caution and selectivity with regional bank exposures due to mixed results and deposit trends, particularly in First Horizon.
• Evaluate companies with clear strategic catalysts like Johnson & Johnson's planned spin-off for potential long-term value, and monitor those facing significant regulatory or market-specific headwinds such as Progressive.
• Pay close attention to the actual S&P 500 earnings growth, which is anticipated to exceed initial estimates, potentially signaling broader market strength.