Key Highlights

● Adjusted earnings of $0.67 a share missed the $0.68 estimate by one cent.

● Customer accounts soared to 5.58 million, and margin loans jumped to $105.2 billion.

● The quarterly dividend rose to $0.15 a share from $0.0875.

● The S&P 500's 55-session run without a steep decline, longest in over six years, ended.

A mixed set of numbers

Interactive Brokers (NASDAQ:IBKR) was in focus on Friday after the electronic brokerage reported third-quarter results following Thursday's closing bell. The S&P 500 member posted adjusted earnings of $0.67 a share, one cent below the $0.68 analysts had expected, according to market data. On a GAAP basis, earnings were $0.69 a share.

The top line told a more upbeat story. Net revenue came to $1.91 billion on a GAAP basis, or $1.87 billion adjusted, according to the company's filing. Market data put revenue at $1.914 billion against an estimate of $1.888 billion and described it as a beat. Net interest income, a major earnings driver for a broker that lends to customers and earns interest on their cash, reached $1.154 billion.

Accounts and trading activity jumped

The growth metrics were the headline. Customer accounts soared to 5.58 million from a year earlier, according to the filing. Daily average revenue trades, or DARTs, climbed to 4.27 million, and margin loans jumped to $105.2 billion, a sign that clients were borrowing more to trade.

The company also raised its quarterly dividend to $0.15 a share from $0.0875. The release contained no executive quotes.

Interactive Brokers runs an automated global brokerage platform used by active traders, advisers and institutions. Its results tend to track trading volumes, customer cash balances and interest rates, all of which have been elevated this year as markets swung on AI enthusiasm, inflation data and Federal Reserve policy.

Trading in a turbulent tape

A clear closing move for the shares was not widely reported. The stock was in the spotlight on a day when the broader market turned sharply lower. The S&P 500 fell 84.62 points to 7,659.44, ending a 55-session run without a steep daily decline, the longest such stretch in over six years, per market data. The Nasdaq Composite dropped 572.99 points to 26,140.03, and the Dow Jones Industrial Average slipped 175.28 points to 52,002.41.

Stocks opened higher before selling built through the afternoon, with the S&P 500 posting its steepest losses in the final hour, market reports showed. Chipmakers and software companies led the decline as investors questioned how the AI build-out will be financed. The VIX volatility index jumped to 19.99.

Financial stocks were among the groups that drew rotation money. Visa (NYSE:V), Mastercard (NYSE:MA) and MetLife (NYSE:MET) set intraday record highs, according to market data. Regional banks including Regions Financial (NYSE:RF), Truist (NYSE:TFC), M&T (NYSE:MTB) and Citizens (NYSE:CFG) also reported results on Friday.

Rates remain a key driver

For a broker, interest rates matter. Higher rates lift the income Interactive Brokers earns on client balances, but they can also weigh on borrowing. An Interactive Brokers strategist noted that higher rates weigh on financed purchases.

The 10-year Treasury yield eased to roughly 5.1 on Friday after reaching its highest level since 2002 earlier in October. The Fed raised rates a quarter point in September, its first hike in three years. Chair Kevin Warsh, speaking at an IMF gathering in Bangkok, gave no signal on the next move. "I don't prejudge meetings," he said. Futures pricing showed the odds of an October hike fell sharply after spiking on Wednesday's hot consumer price report, though markets still price a hike by December.

Interactive Brokers Peers Report Next

The Fed's next rate decision is Oct 28. Housing starts are due Oct 20, University of Michigan sentiment on Oct 23, and the PCE inflation report and first estimate of third-quarter GDP on Oct 29. Brokerage and exchange peers report next week, including CME Group (NASDAQ:CME) on Wednesday, Oct 21, and Nasdaq (NASDAQ:NDAQ) on Thursday, Oct 22.