Morgan Stanley, Bank of America, and State Street are set to release their earnings tonight, with prediction markets pricing in a high probability that their performance will exceed expectations.

According to PolyBeats monitoring, U.S. financial stocks face another earnings window tonight: Morgan Stanley, Bank of America, and State Street will release their third-quarter results before the U.S. market open (evening in Shanghai). On the prediction market Polymarket, the probabilities for all three banks "beating analyst quarterly expectations" are currently optimistic: Morgan Stanley at about 82%, Bank of America at about 72%, and State Street at about 66%. The market settles based on whether the diluted earnings per share in the official financial reports exceed the Wall Street consensus locked in at the time the market was created.

A phenomenon that has drawn considerable discussion recently is this: the market assigns a fairly high probability to "beating expectations," yet bank stocks have weakened first in recent sessions. Persistently high interest rates, shrinking market value of bonds on bank balance sheets, and a slower pace of trading and M&A; combined with market concerns over rising deposit costs and loan-loss provisions, as well as growing difficulty in distributing AI-related loans and widening CDS spreads for some AI-related companies, have added another layer of pressure on sentiment.

In terms of publicly reported magnitudes, the KBW Bank Index has pulled back about 13% from its mid-August high, bank ETFs (such as KBE) are down about 6.8% in the third quarter and about 11%–14% from their highs, and Bank of America has also seen a roughly 13% drawdown in recent months.

During this period of concentrated weakness in bank stocks, some discussions have compared the current stock market performance to the .com era. From mid-1999 to early 2000, bank stocks weakened due to rate hikes, a flattening yield curve, and dashed M&A expectations, with valuations shrinking 40%–50% from their 1998 highs, while capital at the time still flowed from value stocks into tech stocks; the Nasdaq peaked around March 2000—in that cycle, bank weakness appeared earlier, but what truly suffered a major drawdown was tech valuations.