Bank of America (BAC), Citigroup (C), and Goldman Sachs (GS) reported earnings before Tuesday's opening bell. Results from big banks show a rise in profit from a year ago, supported by investment banking strength. Nathan Stovall, S&P Global Market Intelligence director of financial institutions research, joins Seana Smith and Brad Smith on Morning Brief to break down what investors need to know about the results and what they signal about the wider sector.

“There's lots of positive things to see in here,” Stovall tells Yahoo Finance. Looking “at the investment banking piece, not only is that positive from [an] earnings perspective, but I think it speaks to increased risk appetite among corporates.” He explains, “Banks are thermometers of their economies, and when you talk about the big market folks like the Goldmans and the Citis and the BofAs of the world, we're actually seeing their corporate clients willing to take a little bit more risk, pursue more deals, stronger, in particular, on things like debt underwriting.”

“The other thing I'd really point to is heading into this quarter, the big question was going to be on credit, and where are we going to see real cracks in the armor? And we haven't. We really haven't seen any real deterioration, both from the commercial lending segments or the consumer lending segments. So a lot of holding up and signs of pointing to either a soft landing or almost a no landing scenario, which is very encouraging for the US economy and certainly bank stocks.”

Amid changing macroeconomic conditions, including the Federal Reserve’s ongoing rate easing cycle, Stovall says “the real question” for big banks is when the results will reflect the relief of rate cuts. “We didn't expect we would see that really show up in Q3 results because we haven't seen rates come down on deposits until the last few weeks of the quarter, [but] the good news there is we're seeing improved guidance from the banks that have reported.”

Overall, Stovall says third quarter results suggest “the picture is getting a little bit better, and if you think about where we were starting heading into this quarter, there was a lot of fear there of how ugly that could get and whether or not there would be improvement soon. And I think these banks are guiding that we are going to see better days ahead.” Given investors’ worries going into big bank earnings and the solid results, Stovall says, “The fact that you aren't seeing a lot of negativity come out of the banks that have reported, I think, is one of the reasons you saw a rally on Friday and that the stocks are holding up. And I wouldn't be surprised if you saw continued strength here after the prints today.”

To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.

This post was written by Naomi Buchanan.