Banks beat. Their stocks didn't care.

Good morning. Tuesday the S&P 500 slipped 0.02% to 7,805.45, the Nasdaq fell 0.15% to 27,204.38 and the Dow lost 0.35% to 51,670.10, as strong bank reports failed to lift bank stocks and Johnson & Johnson dropped 5.7% (CNBC; Reuters). Overnight, S&P 500 futures are up about 0.1%, chip-equipment maker ASML posted profit well above estimates, Brent is near $106.39 and Bitcoin is near $83,400. September CPI lands at 8:30 AM ET.

Stocks, VIX and yields are Tuesday's close. Futures and oil as of ~3:43 AM ET Wednesday vs. Tuesday's settle. Crypto as of ~3:52 AM ET Wednesday, vs. its 24-hour open. Nikkei and Kospi are Wednesday's close. Stoxx 600 as of ~3:38 AM ET Wednesday.

One-line read: A flat day on the surface hid big earnings swings underneath; futures are barely higher, ASML's strong report is lifting Europe's tech stocks, and CPI decides the next move.

Earnings season opened Tuesday with JPMorgan Chase, Goldman Sachs, Wells Fargo and Citigroup, and the results were mostly good. Goldman posted $18.68 billion in revenue, almost $2 billion above the LSEG estimate of $16.71 billion, on a 72% jump in equities trading revenue (CNBC). Citi earned $2.85 a share vs. $2.66 expected and called it its best third-quarter revenue in a decade (CNBC; Citi). UnitedHealth earned an adjusted $4.69 a share vs. $4.14 expected and raised its full-year profit forecast (CNBC; AP). JPMorgan was the outlier, with a rare profit miss: $5.57 a share vs. $5.90 expected (CNBC). Yet every one of those stocks closed lower. Goldman was up 4.1% at its high and closed down 0.2%; UnitedHealth went from up 5.6% to down 0.2% (Yahoo Finance).

The numbers: Citigroup −5.6% to $124.53, Wells Fargo −3.1% to $80.74, JPMorgan −0.9% to $331.43, Goldman −0.2% to $891.91, UnitedHealth −0.2% to $377.76 (Yahoo Finance). Wells Fargo beat on profit ($1.87 vs. $1.85) but missed on revenue ($21.87 billion vs. $22.3 billion) and on net interest income ($12.52 billion vs. $12.66 billion) (CNBC). Citi told analysts to expect trading revenue to drop about 20% from the third quarter, "or possibly a bit more" (Citi earnings call). JPMorgan raised its 2026 net interest income forecast to $106.2 billion from $105.5 billion (CNBC). The Financial Select Sector SPDR (XLF) fell 0.4% (Yahoo Finance).

Why it matters: Analysts expect S&P 500 profits to have grown nearly 30% from a year earlier (FactSet via CNBC). When the bar is that high, "good" is priced in and only "great" moves a stock up. "These banks still reported strong numbers, it's just that expectations were high," Rebecca Walser of Walser Wealth Management told CNBC. If you own an S&P 500 or a dividend fund, banks are a big slice of it, and Tuesday showed what a high bar looks like.

What to watch: Bank of America and Morgan Stanley report before the 9:30 AM ET open (CNBC). Bank of America traded at $52.73 after hours, 2.3% below its $53.96 close, after Treasury announced $1.21 billion in penalties against it late Tuesday (Yahoo Finance; US Treasury).

J&J topped profit estimates and raised its 2026 outlook to $101.2 billion in sales and $11.10 in adjusted earnings per share at the midpoints (Reuters; J&J). Investors looked at MedTech instead, where sales grew just 2.5%, vs. 7.7% at the drug business (J&J; Yahoo Finance). CFO Joe Wolk told Yahoo Finance that some Middle East countries are shifting budgets "on defense versus healthcare." The stock closed at $248.61, and it was up more than 27% this year before Tuesday (Yahoo Finance). Reported earnings were just $0.09 a share because of a one-time charge for the proposed talc litigation resolution, plus an acquisition and a collaboration deal; adjusted EPS was $2.59 (J&J).

Why it matters: J&J is one of the biggest names in healthcare and dividend funds. Its drop helped make healthcare the S&P 500's worst sector Tuesday, down 1.3% (Reuters).

The PHLX Semiconductor Index fell 0.2%, its fifth straight loss, after Broadcom CEO Hock Tan likened some of the money flowing into the sector to "casino gambling" (Reuters). Micron fell 3.6% to $953.19, and chip-equipment maker Applied Materials fell 6.7% to $464.24, its sixth straight loss (Yahoo Finance; Reuters). Not every chip stock fell: Broadcom gained 0.7%, AMD 1.9% and Nvidia 1.0% (Yahoo Finance). The VanEck Semiconductor ETF fell for a sixth straight session (CNBC). Overnight, ASML, the Dutch company that makes the machines used to print the most advanced chips, reported quarterly profit of €4.96 billion vs. €4.1 billion expected, on sales of €11.66 billion that were just shy of the €11.72 billion estimate, and said some customers want to place orders for 2029 and 2030 (CNBC; ASML). Its shares were up 3.1% in Amsterdam at ~3:39 AM ET, while Seoul's Kospi gave up an early gain to close down 0.4%, its sixth straight loss (Yahoo Finance).

Why it matters: Analysts expect chip and chip-equipment companies to grow earnings about 130% this quarter, vs. nearly 30% for the whole S&P 500 (FactSet via CNBC). That is a main engine of this year's earnings growth, so a long chip slide matters for any broad index fund.

Economists polled by Dow Jones expect September CPI to rise 0.6% for the month and 3.6% from a year ago, up from 3.4% in August; core CPI, which strips out food and energy, is seen up 0.2% and 2.5% (CNBC). Gasoline is averaging $4.34 a gallon vs. $3.08 a year ago (AAA via CNBC). The 10-year Treasury yield ended Tuesday at 5.21%, down from 5.24% on Friday, in the bond market's first session since the holiday (US Treasury). Boston Fed President Susan Collins said Tuesday she expects "it will be appropriate to raise rates a bit further before the end of the year" (Boston Fed). Fed funds futures price a 21.6% chance of a hike at the Oct. 28 meeting and an 89.8% chance the Fed's target is higher by its Dec. 9 meeting (CME FedWatch, as of ~3:56 AM ET).

Why it matters: A hot number would raise the odds of another Fed hike; the Fed's current target is 3.75%–4.00% (Federal Reserve). Higher rates mean higher mortgage and card costs and lower bond-fund prices.

Five of six beat on profit. All six closed lower. Each line runs from a stock's best level of Tuesday's session to where it closed. UnitedHealth gave back 5.8 percentage points from its high and Goldman 4.4, while Citi went from up 1.2% to down 5.6%. The only profit miss, JPMorgan, did better than three of the five that beat.

Source: regular-session highs and closes via Yahoo Finance, Oct 12–13, 2026; beat/miss = adjusted EPS vs. LSEG consensus (CNBC); J&J per Reuters.

Net interest income, or NII, is what a bank earns on loans and bonds minus what it pays depositors. It is the oldest business in banking: borrow at one rate, lend at a higher one, keep the gap. JPMorgan expects $106.2 billion of it this year (CNBC). That's why analysts watch it so closely: Wells Fargo beat on profit Tuesday, but its NII came in about $140 million short of estimates, and the stock fell 3.1% (CNBC; Yahoo Finance). Higher rates can widen the gap, since loans reprice up, but only if banks don't have to pay much more to keep deposits from leaving for money-market funds and Treasurys. Think of a store whose selling prices and supplier costs are both rising: what matters is whether the margin in between grows.

That's the desk. See you tomorrow at 6 AM ET.

— The Overnight Desk Team

Note: The Overnight Desk Team may hold positions in assets discussed. Nothing here is investment advice. · Sponsor: No one paid for any mention in this issue.