Washington is groping for a deal on extending the debt ceiling. It's not clear if the deal will include reopening the government, but as I noted yesterday, it's the , because there is where the default risk lies.
The President will meet with Senate Republicans today at 11:15 PM ET. That will likely be the key event for the day.
Asian markets all ended in the green. up 1.5 percent. up 1.7 percent, while Europe ended mostly up.
Elsewhere
1) Wells Fargo posted a modest beat of 99 cents against the 97 cents expected. That beat, however, was due to a reserve release that have helped many banks in the last year. Revenues of $20.48 billion were below estimates of $20.97 billion.
The yield curve steepened last quarter, but it's still flattish and remains a big problem for banks. Interest income is still about 60 percent of revenues for banks like Wells. Net interest income of $10.75 billion was flat compared to last quarter.
Wells is the largest mortgage originator in the country, and when business is good, it's a big help. Yet when it slows down it can be ugly. Mortgage banking revenue was down 43 percent (refinancings are 70 percent of the volume), and even mortgage originations were down 30 percent from the prior quarter, even though management had already indicated that drop in prior guidance.
The problem is, they can't cut expenses as fast as the business is declining. They probably have 30,000-40,000 people working in mortgages, and they will be letting a lot of people go this quarter.
Here's what is a little worrisome: We are a long way through an improving credit cycle. What we should be seeing now is higher rates and an expansion of the loan book. We are not seeing either. Of course, you can say the Federal Reserve is keeping rates low, but it's supposed to create more loan interest.
Loan growth is rather anemic at 2.5 percent annualized. That's down from 4.5 percent from a year ago.
There should be more loans being made, but the demand isn't there. According to the Fed, $8.6 trillion is on deposit in U.S. banks, with $6.7 trillion on loans, so the industry loan to deposit ratio was 77 percent. It was 80 percent a year ago. Two years ago, it was 83 percent. Historically, it should be closer to about 100 percent.
What's this mean? It means that people are continuing to hoard cash. And--this is the frustrating part--with rates where they are now, there is no reason to keep hoarding cash. So why are they doing that?
Because there is a lot more uncertainty. Is that permanent or temporary? That's the big question, and it's a big one for banks, because they make money by growing loans.
2) JPMorgan was expected to have a big litigation reserve, but not this big. The mega-bank swung to a loss of $0.17 a share ($380 million), well below estimates of a gain of $1.20 (although to be fair, the bank would have posted a $1.42 per share profit without legal costs).
The problem was a $1.85 per share loss tied ($9.2 billion) tied to legal expenses. and there could be more coming. They didn't comment on the status of any legal settlements. They want credit for the Bear Stearns and Washington Mutual deals because they did it at the behest of the government.
3) Stock mutual funds see outflows for a second consecutive week in the period ended Wednesday after collecting money for 38 straight weeks from January through the end of September, reports Lipper. Stock mutual funds shed $142 million last week, while equity ETFs lost $5.9 billion. Bond mutual funds collected nearly $1 billion as investors turned to safe-haven plays amid the U.S. government shutdown.
4) Gap falls to a five-month low, shedding five percent, after the retailer reported a three percent drop in September same-store sales, which was below the Street's expectation of a more than one percent gain. Sales at Banana Republic saw the biggest decline, falling five percent.
—By CNBC's Bob Pisani