jpmorgan

JPMorgan stock is trading lower in early US price action today after the company missed both the topline and bottomline estimates in the second quarter of 2022. Bank stocks were anyways under pressure amid recession fears and JPMorgan’s earnings is a warning signal for investors.

This week, we’ll get earnings from Wells Fargo as well as Citigroup. Then on Monday, Bank of America would release its quarterly earnings. Markets follow the earnings of banks quite closely as they provide insights into the economy.

JPMorgan reported revenues of $31.63 billion in the second quarter which was below the $31.95 billion that analysts were expecting. Its adjusted EPS of $2.76 was also below the $2.88 that analysts were expecting. JPMorgan set aside $428 million for loan loss reserves in the second quarter. It took a $902 million credit reserve charge in the first quarter also amid fears of higher delinquencies in its loan book.

Notably, JPMorgan’s CEO has been quite bearish on the economic outlook and previously called for an economic “hurricane.” Tesla’s CEO Elon Musk has also been bearish on the outlook for the US economy and said that he has “super bad feelings.” Tesla has also laid off some of its salaried employees and is adding more hourly workers. Tesla stock is down sharply this year amid the sell-off in growth name.

Unity Software, which went public in 2020 in a hyped IPO is also down sharply. The stock slumped yesterday after the company announced the acquisition of ironSource at a massive premium.

JPMorgan is Cautious about the US economy

In his prepared remarks in the earnings release, Dimon said, “in our global economy, we are dealing with two conflicting factors, operating on different timetables. The U.S. economy continues to grow and both the job market and consumer spending, and their ability to spend, remain healthy.”

He however added, “But geopolitical tension, high inflation, waning consumer confidence, the uncertainty about how high rates have to go and the never-before-seen quantitative tightening and their effects on global liquidity, combined with the war in Ukraine and its harmful effect on global energy and food prices are very likely to have negative consequences on the global economy sometime down the road.”

The bank also suspended its share buyback program. It would however continue with the dividend program. Currently, it has a dividend yield of 3.57% which is higher than the S&P 500’s dividend yield. Citigroup has a dividend yield of almost 4.5%.

Previously, Warren Buffett’s Berkshire Hathaway held a stake in JPMorgan. He however exited the bank last year. This year, Buffett has added Citigroup to the conglomerate’s vast portfolio.

After JPMorgan’s earnings release, markets would be watching the commentary of other banks also. Being a cyclical business, banks are among the worst affected by economic slowdowns.

Meanwhile, while Reddit traders have been in the limelight for pumping meme stocks, in the past JPMorgan has also been among the popular Reddit stocks. While the speculative Reddit stocks have crashed, some of the fundamentally strong Reddit stocks have been holding off well despite the market crash.

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