Earnings live: TSMC profit surges, CSX and Interactive Brokers Q3 results beat estimates

The third-quarter earnings season revealed a strong performance among major Wall Street banks, including Morgan Stanley, Citigroup, and Bank of America, driven by robust dealmaking and trading activity. Chipmakers like TSMC and ASML also reported solid results, propelled by increasing AI demand, with TSMC raising its 2025 revenue outlook. In contrast, regional banks presented a mixed picture, with some facing deposit declines, while financial services firms such as Charles Schwab and Interactive Brokers posted record revenues and client growth. Key corporate developments included Johnson & Johnson's plan to spin off its orthopedics unit and Progressive's earnings miss due to a significant regulatory expense in Florida.

Analysis

The third-quarter earnings season has commenced with a generally positive tone, reflecting an expected 7.9% jump in S&P 500 EPS, albeit a deceleration from Q2's 12% growth. Major Wall Street banks, including Morgan Stanley (MS), Citigroup (C), and Bank of America (BAC), reported robust results, driven by significant dealmaking and trading activity, with MS profits surging 45% and C's total revenue growing 9%. This strong performance led to notable stock gains for these institutions.

Demand for artificial intelligence continues to be a significant tailwind, boosting chipmakers like Taiwan Semiconductor Manufacturing Company (TSM), which saw profits surge 39% year-over-year and raised its 2025 revenue outlook to mid-30% annual sales growth. Similarly, financial services firms such as Interactive Brokers (IBKR) and Charles Schwab (SCHW) posted record revenues and client growth, with SCHW's total client assets increasing 17% to $11.59 trillion.

However, the earnings landscape is bifurcated, with regional banks facing headwinds; First Horizon (FHN) saw deposits decline and its stock drop over 10%, while PNC and Citizens Financial Group (CFG) also experienced declines. Progressive (PGR) significantly missed earnings estimates, with net income down 48% due to a $950 million expense from a Florida policy change, causing its stock to tumble over 6%. Johnson & Johnson (JNJ) demonstrated strategic portfolio management by raising its sales forecast and announcing plans to spin off its orthopedics unit.

These results highlight a market where strong secular trends, like AI adoption and capital markets activity, are driving outperformance, while sector-specific and regulatory challenges can create significant downside risks for individual companies.

Key Decisions for Investors

• Consider overweighting large-cap financial institutions and AI-leveraged semiconductor plays, as strong Q3 results and positive guidance suggest continued momentum.
• Maintain a cautious stance on regional bank exposures, closely monitoring deposit trends and net interest income projections due to sector-specific pressures.
• Evaluate company-specific regulatory and operational risks, as demonstrated by Progressive's significant earnings miss, which can override broader market optimism.
• Assess strategic corporate actions, such as J&J's planned spin-off, for potential long-term value creation and focused capital deployment in specialized segments.