Two of the largest commercial banks in the United States stated on Friday that despite signs indicating a recent increase in inflation rates and the burden of high interest rates that have strained some low-income Americans, U.S. consumers overall maintained strong spending momentum in the third quarter. Financial report data shows that Wall Street financial giants JPMorgan Chase (JPM.US) and Wells Fargo (WFC.US) demonstrated considerable overall profit resilience. Although JPMorgan Chase increased its provision for bad loans, optimistic comments from the bank's executives further alleviated investors' concerns about the pressure of rising lending costs on consumers and significantly eased worries about the U.S. economy teetering on the edge of recession.

In terms of stock prices, JPMorgan Chase, a financial behemoth with a market value of up to $600 billion, saw its stock price rise by more than 5% during U.S. trading hours, closing with a gain of over 4%. Wells Fargo's stock price also rose nearly 6% during trading, closing with a 5.6% increase. Undoubtedly, these two high market capitalization financial giants propelled the U.S. stock benchmark—the S&P 500 index—to reach a historical high on Friday, marking the 45th historical high for the index this year. The optimistic messages they conveyed about a "soft landing" also filled investors with anticipation for the new round of U.S. stock earnings seasons.

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"Overall, we believe that consumer spending patterns are very stable," noted Jeremy Barnum, Chief Financial Officer of JPMorgan Chase. As one of the largest commercial banks in the United States and a leader in the U.S. economy, he added that consumer spending has returned to a normalized pattern following the rebound after the COVID-19 pandemic. For a period after the pandemic, Americans were primarily spending on travel and dining out, but now consumption expenditure is more balanced.

Occasional weak data in the U.S. non-farm employment market has triggered investors' concerns that the Federal Reserve's aggressive interest rate hikes to curb inflation might push the U.S. into an economic recession or a "hard landing." However, Barnum stated in an interview with analysts that the consumer spending pattern is "consistent with a solid consumer base and aligns with the central optimistic argument of a strong labor market and the current economic scenario of 'no landing'."

Wells Fargo's Chief Financial Officer, Michael Santomassimo, told reporters that although the scale of spending on credit and debit cards has decreased compared to earlier this year, it remains "quite stable."

The bank's financial report stated that consumer purchases based on debit card transactions and overall transaction volumes grew by nearly 2% year-over-year, while transaction volumes displayed by credit card sales terminals grew by about 10% year-over-year. JPMorgan Chase's latest debit and credit card consumption volumes grew by 6% year-over-year.

Two other major Wall Street financial giants—Bank of America (BAC.US) and Citigroup (C.US), which are also two of the main commercial banks in the United States—will release their earnings reports next week. Retail sales data will also be announced, providing the market with a more comprehensive understanding of a crucial data point for the U.S. economy—consumer spending scale.

Some institutional investors have expressed that the confidence revealed in the financial reports of Wall Street giants on Friday is, so far, a positive and significant signal for the U.S. stock market and the entire U.S. economy.

In terms of economic data, the latest better-than-expected non-farm employment data, stronger-than-expected unemployment rates, and upwardly revised long-term GDP growth, combined with initial jobless claims over the past few weeks that have largely met expectations, and the continued steady decline of U.S. inflation, along with the strong resilience of consumer spending shown in the earnings reports of Wall Street financial giants on Friday, paint a picture that perfectly matches the "soft landing" scenario envisioned by Federal Reserve officials. Therefore, some economists are loudly proclaiming that the U.S. economy has successfully achieved a "soft landing" or is incredibly close to it.

After the pandemic caused the U.S. economy to suddenly decline into a brief economic recession, followed by the Federal Reserve's aggressive interest rate hike process even after high inflation, pushing the U.S. benchmark interest rate to the highest level in over 20 years at 5.25%-5.5%, the U.S. economy rebounded strongly. The comprehensive annual update from the U.S. Bureau of Economic Analysis shows that from the second quarter of 2020 to the end of 2023, the U.S. Gross Domestic Product (GDP) had an average growth rate of 5.5% adjusted for inflation. Compared to the previously announced 5.1% increase, the revised figure is significantly more optimistic.For the United States' second quarter actual GDP annualized quarter-on-quarter final value, it maintains the optimistic growth rate of 3% announced earlier, which mainly reflects the accelerated growth of U.S. consumer spending, inventory investment, and business spending compared to the previous quarter. This indicates that the U.S. Q2 economic output still achieved strong growth. In the first quarter of this year, the U.S. government revised the U.S. GDP growth rate from the previously reported 1.4% to the latest final value of 1.6%. The strong economic growth data for Q1 and Q2, combined with the Federal Reserve's initiation of the interest rate reduction cycle by 50 basis points, greatly enhances investors' confidence in the U.S. economy's successful "soft landing."

"In my view, JPMorgan Chase and Wells Fargo's interpretation of consumer spending is very healthy. Consumer spending seems to be more normalized, which is very healthy for the overall U.S. economy," said Dave Wagner, head of equity at Aptus Capital Advisors, which holds shares in large banks.

However, Wells Fargo's Chief Financial Officer, Tim Sloan, warned that the cumulative impact of the long-term rise in U.S. inflation is pulling down the income-type consumer group, and the bank is observing whether this pattern will spread to high-income groups and high-net-worth groups that do not drive consumption based on salary.

On Friday, a survey by the University of Michigan showed that U.S. consumer sentiment fell slightly in October due to ongoing dissatisfaction with high prices.

"When you look at the overall average, it looks good, but I think it is more distorted by high-income, high-net-worth consumer groups," said Paul Nolte, a senior wealth advisor and market strategist from Murphy & Sylvest in Illinois.

He added: "It has to be admitted that for those groups with lower incomes, the situation is a bit grim. We see an increase in the scale of arrears and auto loans. We see a decrease in the scale of savings, and credit card balances continue to increase."

Both JPMorgan Chase and Wells Fargo, the two major commercial banks, have set aside a large amount of cash to cover potential bad debt growth. JPMorgan Chase allocated $3.11 billion, a significant increase from the $1.38 billion allocated a year ago, mainly due to potential credit card loan losses. At the same time, Wells Fargo allocated $1.07 billion, slightly lower than the $1.2 billion allocated last year, although the bank noted in its financial report that it has increased the provision for credit card loans as the balance trend increases.

The Philadelphia Federal Reserve said on Wednesday in Eastern Time that the credit card delinquency rate, which exceeded the ten-year high earlier this year, also triggered concerns that Americans are becoming overly stressed due to inflation and high interest rates, but this situation began to show a significant improvement in the second quarter.

The good news is that the Philadelphia Federal Reserve stated that short-term borrowing for one month or longer has marked the largest decline in three years, although it is still too early to announce a turning point in the overall credit performance in the United States.

Barclays Bank's analysis team said in a report on Thursday that they expect "the scale of credit card loan losses for U.S. consumers will continue to shift towards a normalized process, but the speed may be slower than in the previous few months.""We believe that the scenario of a 'soft landing' for the U.S. economy has become very clear, but it may be premature to conclude that the Federal Reserve's unexpected rate cut of 50 basis points in September has completely stabilized the labor market. We think it is more likely that the Fed's next rate cut will be a more normal pace of 25 basis points in November," said Bloomberg Economics economists Anna Wong, Stuart Paul, Eliza Winger, and Estelle Ou.