Regional banks drive US market gains
After a choppy week, the three major United States (US) equity indices finished higher on Friday and for the week. Markets were buoyed as tariff threats faded and regional bank earnings eased credit market concerns. For the week, the Nasdaq 100 finished 2.46% higher, the S&P 500 added 1.70%, and the Dow Jones lifted by 711 points.
Regional banks rebounded on Friday after several, including Truist Financial, Regions Financial, and Fifth Third, reported better-than-expected earnings. Zions Bancorporation surged 5.8% to $49.67, Truist gained 3.67% to $42.60, Western Alliance added 3.1% to $72.48, and Fifth Third climbed 1.31% to $40.89.
Despite Friday’s rebound, questions remain about whether last week’s regional bank flare-up is contained or an early sign of broader systemic stress, particularly given the rapid growth in collateralised loan and private credit markets and signs of weaker lending discipline. Thursday’s flare-up followed JPMorgan’s Jamie Dimon warning earlier in the week about ‘cockroaches’ in the credit market after the collapses of Tricolour Holdings and First Brands Group.
Focus on US-China developments and upcoming tech earnings
Tariff-related tensions eased into the weekend after US President Trump acknowledged that a 100% tariff on China was unsustainable. It was confirmed he will still meet Chinese President Xi Jinping at the Asia-Pacific Economic Cooperation (APEC) Summit at the end of this month. News that Treasury Secretary Bessent will meet Chinese officials later this week in Malaysia also helped sentiment.
Looking ahead, attention this week will focus on US-China developments and third quarter (Q3) 2025 earnings from technology companies, including Tesla, Netflix, International Business Machines Corporation, and Intel.
Despite the US government shutdown entering its fourth week and the Federal Reserve (Fed) now in the blackout period, markets will receive a US inflation update (previewed below).
Consumer price index
Date: Friday, 24 October at 10.30pm AEST
For August, headline inflation in the US increased by 0.4% in line with expectations. This resulted in the annual rate of headline inflation rising to 2.9%, below the forecast of 3%.
The annual core consumer price index (CPI), which excludes volatile items like food and energy, rose by 0.3% month-on-month (MoM), which saw the annual core inflation rate remain at 3.1%, unchanged from July and in line with market expectations.
For September, the expectation is for the annual headline inflation rate to rise to 3.1% year-on-year (YoY), which would be its highest reading since May 2024, while the core measure is expected to remain at 3.1% YoY.
Ahead of this, the US interest rate market is fully priced for a 25 basis point (bp) Fed cut in October and fully priced for another 25 bp cut in December, as the Fed prioritises bringing support to a cooling labour market despite persistent inflation.
