End of Hopes for Cheaper Money | Weekend Intelligence #34
The past week was a reminder of how fragile the foundations of market optimism are. U.S. inflation data dashed hopes for faster Fed easing, technology and chip stocks suffered a sell-off, and major banks opened earnings season in sharply uneven form. Europe maintained a calmer pace, although luxury goods companies reported weaker demand. The week thus ended with two very different stories.
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Key points
Why the results of major U.S. banks split into two uneven halves
What is behind AT&T's sale of its Mexican division just two days after the worst session of the year
How three September statistics rewrote rate expectations in 48 hours
What the eighth day of chip declines means for the Nasdaq, and why the Dow moved in the opposite direction
Why Wednesday evening with Meta and Tesla is becoming next week's main event
Record trading at JPMorgan, $1.2 billion fine for Bank of America
The earnings season for major U.S. banks split into two halves on October 13 and 14. JPMorgan reported net income of 15.3 billion USD for the third quarter (+6% year over year) and earnings per share of 5.57 USD. Bank of America, by contrast, admitted to knowingly violating the Bank Secrecy Act and will pay the Treasury Department more than 1.2 billion USD.
The difference between the two banks was not driven by their loan books, but by their trading floors. JPMorgan's revenue reached a managed 50.9 billion USD (+8%), return on tangible common equity remained at 20%, and its markets division added 15%. Citigroup increased revenue to 23.8 billion USD (+8%) and net income to 5.2 billion USD, or 2.85 USD per diluted share.
Trading bonds, currencies and commodities is essentially a bet on rate movements—and in 2026, the bond market is driving those moves. Citigroup generated 4.4 billion USD from FICC, versus expectations of 4.3 billion. Bank of America, on the other hand, lost ground in the same environment: bond-trading revenue fell 17% to 2.55 billion USD, and even a 10% increase in equity trading to 2.51 billion USD could not make up for it—trading overall fell 5% to 5.1 billion.
The fine has two parts, and both are unusually severe. The OCC imposed a record civil penalty of 750 million USD, with the remainder going to the Treasury Department; it is the third-largest penalty in the department's history. The bank failed to report suspicious transactions totaling more than 5 billion USD on time; according to regulators, more than a billion of them involved Chinese money-laundering networks and illegal flows along the U.S. southwest border. A separate settlement of 11.6 million USD covers sanctions violations, including those involving Iran and Russia.
Treasury Secretary Scott Bessent summed it up by saying that not even the largest financial institutions are above the law. From an earnings perspective, this is not a one-off item the market can simply shrug off: anti-money-laundering remediation programs mean years of elevated compliance costs and restrictions on onboarding new clients—precisely the things that curb fee revenue growth.
The second development is a 5 billion USD loan to Volta Infrastructure Holdings, a company focused on cloud infrastructure for artificial intelligence. JPMorgan and Goldman Sachs are leading the deal, but are underwriting only a 1.3 billion USD tranche; they are leaving the larger 3.7 billion USD chip-financing tranche to others. Banks are collecting fees from the AI boom and passing the risk along.
The backdrop is a correction in bank stocks as long-term yields sit at their highest levels since 2002—the market is asking what another round of more expensive money will do to the sector's loan books.
The first signal will be the outlook for net interest income in the fourth quarter and in 2027, along with the pace of reserve building—and, at Bank of America, whether the drop in trading revenue was a one-off.
AT&T sells Mexican division for $2 billion after a 9.8% plunge
Two trading days after the worst session of 2026, AT&T announced the sale of its Mexican unit. On October 13, it agreed with Grupo Televisa and Fintech Holdings to sell AT&T Mexico for 2 billion dollars in cash at closing, plus additional contractual and contingent payments. This followed a 9.8% drop in the stock price on October 9, after SpaceX bought nationwide low-band spectrum.