U.S. equity market is opening strong today. In addition to continued worries over inflation - is it transitory or not? - and global supply chains, this morning in particular but generally this week brings forth bank earnings. Yesterday JP Morgan Chase's (JPM) released its quarterly results, which beat expectations primarily due to the credit reserve release booked during the quarter, investors didn't digest this beat well as the stock declined (although not unexpected, as the bank stocks usually run up pre-earnings and then sell-off afterwards - see in the past). This morning brings Wells Fargo, Morgan Stanley, Bank of America and Citi Group, and investors will be sizing up loan growth, credit card, investment banking, and other metrics to determine which bank(s) gained market share during the quarter. We own Wells Fargo and Morgan Stanley going into the quarter, here we will just provide a brief update but later on in the day we will write a detailed analysis of the quarter.

First Look at Wells Fargo's Quarterly Results

Wells Fargo (WFC) reported September quarter EPS of $1.17, well ahead of the $0.94 consensus, even though revenue for the quarter was little changed year over year and better than the consensus forecast. Similar to JP Morgan, the bulk of the bottom line beat can be attributed to a $1.7 billion decrease in credit loss allowance. We'll get more details on the company's earnings conference call that will be held this morning, but on its face, it appears its EPS beat was a low-quality one given the change in the allowance for credit losses added roughly $0.30 to the quarter's EPS.

The other financial name in our portfolio, Morgan Stanley (MS) also reported this morning. Earnings 1.98$ vs 1.68$ estimate. Earnings missed on the wealth management front (1.45B actual vs 1.65B estimate). Growth is still evident (institutional securities 7.5B vs 6.1B estimate; investment banking 2.85B vs 2.2B estimate). Overall these are good numbers and we still think this is the best name in the financials group.

More Supply Chain Woes

CNH Industrial (CNHI)  announced it will temporarily close several of its European agricultural, commercial vehicle, and powertrain manufacturing facilities in response to ongoing disruptions to the procurement environment and shortages of core components, especially semiconductors.

President Biden yesterday unveiled a plan to expand operations of West Coast ports to round-the-clock in an attempt to address the record-high number of ships waiting in the waters outside of Los Angeles and Long Beach - currently at 60 compared to rarely having even one waiting pre-pandemic. The ports of Long Beach and Los Angeles alone account for around 40% of all shipping containers entering the U.S. We are cautiously optimistic about this, but acknowledge it will take some time to chew through the number of ships that are queued up, meaning we are still likely to see some impact during the holiday shopping season.

China's September PPI hits a record high

China's September PPI reading came in hotter at +10.7% YoY vs. the expected rise to 10.5% YoY. This marked the ninth straight month of increases in producer inflation, which hit the highest level since at least 1996, amid the surging cost of raw materials, particularly coal. Given the country's manufacturing footprint, we continue to think this will ripple through the global supply chain leading to higher input cost comments in the coming weeks and more companies taking pricing action to offset that.

What the Fed's FOMC Minutes Confirmed

The FOMC Minutes from the September meeting shed some light on how the Fed would taper asset purchases if begun later this year. Per the minutes, asset purchases would be reduced on a monthly basis by $10 billion - $15 billion in Treasury securities and $5 billion in agency Mortgage Backed Securities until the middle of 2022. Candidly, there was little surprise in what was said following comments earlier this week from St. Louis Fed President James Bullard.

On the heels of those meeting minutes, there will be several Fed officials making the rounds with speeches today, and odds are there will be more color to be had on the potential taper timing and sizing.

Market your calendars!

Apple (AAPL) announced it will host its next virtual event on October 18, and the prevailing thought is the company will be talking new Apple Silicon powered-Macs.