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JPMorgan Chase is headquartered in New York.
Nina Westerwelt / Bloomberg
JP Morgan
Chase has historically been considered a bellwether for financial stocks when it posted quarterly earnings. But on Monday, the banking giant’s Investors’ Day spurred a sector rally.
The
SPDR S&P Bank
ETF (Ticker: KBE) rose 3.3% in midday trading, surpassing 1.7% profit
S&P 500 Index
,
Which has been close to the bear-market area.
Among the top performers in the sector was JPMorgan (JPM), which saw shares rise 7.6%, keeping it on track for the best day since November 9, 2020, when stocks rose on positive vaccine data.
Monday’s jump comes after the bank raised its 2022 net-interest-earnings guidance to $ 56 billion, up from its earlier forecast of $ 53 billion. JPMorgan said it expects to benefit from higher single-digit debt growth and rising interest rates.
That’s good news for peers. Although JPMorgan is the market leader in many of the markets it operates — investment banking, consumer, and commercial lending to name a few — it is not considered as rate sensitive as some of its peers. Meanwhile,
Bank of America
(BAC), perhaps the most rate-sensitive of the big banks, rose 6.6% in midday trading;
Wells Fargo
(WFC) shares rose 6%.
JPMorgan also said it expects its return on actual general equity – a measure of profit – to hit 17% this year, which was uncertain earlier this year.
Bank stocks need to hear just what the pink outlook looks like. This was supposed to be a boon for bank stocks with the expectation that the Federal Reserve would raise interest rates this year. The sector did well during the epidemic thanks to contract building and business growth, but the bank’s stock gains were expected to return to their bread-and-butter business in 2022: lending money at interest rates more than what they repaid.
Instead, the market has expressed concern that the Fed – in an effort to reduce inflation – will raise rates too quickly and plunge the economy into recession. High rates do not help banks when customers are afraid to borrow or unable to repay.
But in Monday’s presentation, JPMorgan reiterated the financial health of its customer base, pointing to a healthy balance sheet and saying the US economy is “fundamentally strong” – despite recent turmoil. Still, the bank is not taking lightly the challenges facing the economy – the war in Ukraine, inflation and the Fed’s austerity measures.
“Strong economies, big storm clouds,” CEO Jamie Dimon said Monday, referring to economic risks. “I call them storm clouds because they are storm clouds, they can vanish. If it was a hurricane, I would tell you. “
On Monday investors were banking on Dimon’s forecast being correct.
Write Carleton in English at [email protected]
