STOPLINE JPMorgan, the nation's largest bank, kicked off its second-quarter earnings season on Thursday with worse-than-expected results, buoyed by deteriorating market conditions, prompting the company's billionaire CEO, Jamie Dimon, to warn that the fate of the economy largely depends on how quickly the US Federal Reserve raises interest rates that eat away at corporate profits to fight rising inflation.
JPMorgan shares fell 5% after the company reported second-quarter earnings of $8.6 billion, or $2.76 per share – down 28% year-over-year and behind beating expectations that called for earnings of $2.88 per share $428 million in credit to protect against bad debt, lower investment banking fees and lower card-issuing revenue.
In a statement, Dimon acknowledged that the global economy was grappling with "conflicting factors" including high inflation, declining consumer confidence and "unprecedented" quantitative tightening that could have "adverse consequences." at some point", and announced that the bank would suspend its actions. redemptions to secure liquidity in times of uncertainty.
In a post-earnings call, Dimon was unwilling to predict a recession next year, saying instead that a number of possibilities - including a soft landing and an outright recession - depend on the level interest rates, economic growth tends to slow due to the rising cost of credit and if the war in Ukraine will escalate.
Dimon was also somewhat optimistic, saying consumers are "in much better shape" than they were before the Great Recession, with less debt, "abundant" jobs and more income, and that were already spending less to hedge against a downturn. JPMorgan wasn't the only one to report a deficit on Thursday morning: Morgan Stanley reported earnings of $1.39 per share, below analysts' expectations of $1.57 on average as the bank's earnings slumped. investment plunged 55%; Shares are down 3%.
In a morning note, Sevens Report analyst Tom Essaye said investors were "desperate" to determine when the Fed will stop raising rates, which will be crucial in predicting earnings in the quarters ahead, and warned that stocks may have more room to fall there. is clarity.
"We haven't even seen the impact of the slowdown on earnings, and we haven't even started to see the material economic impact of Fed rate hikes on the broader economy," Essaye said. .
WHAT TO CONSIDER
The winning season has only just begun. Citigroup, Wells Fargo and BlackRock are due to report on Friday, and Goldman Sachs and Bank of America are scheduled for Monday.
Stocks have struggled in recent months as Fed officials scrambled to tackle the worst inflationary spurt in 40 years by rolling back pandemic-era central bank stimulus. After rising 27% in 2021, the benchmark S&P 500 is down 22% this year and is officially in a bear market. To make matters worse, the US economy posted its worst performance since the Covid-induced recession in the first quarter, contracting 1.6% against an initial forecast of 1% growth. Now experts are trying to determine how quickly the economy could slip into a recession - or if it is already there.