The big US investment banks return with earnings on Friday and this could be important after the latest rate cut.
JPM – Daily Chart
The major bank stock daily charts mostly look similar to the JPM chart above. Prices have sold off from the peak and are at a period of consolidation as investors are unsure about the next path. Weakness in JPM will target the support near $204-205.
JPMorgan Chase (NYSE:JPM) opens earnings season for the bank sector on Friday, and investors are expected to focus on net interest income after strong jobs data fueled uncertainty about the path of future Federal Reserve rate cuts.
Wall Street’s investment banks are expected to report lower profits for the third quarter with interest income expected to shrink as loan demand remains subdued. The sector saw a big windfall in net interest income (NII), which is the difference between what they earn on loans and pay out on customer deposits, after the Fed raised rates into 2024.
“Weak loan growth, higher deposits, increase in loan loss provisions due to a higher unemployment rate- all of this will result in pressure on margins and will moderately bring NII down,” said Stephen Biggar, analyst at Argus Research.
Additional rate cuts could shrink banks’ income from interest payments, but could balance the loss with growth in customer borrowing and corporate deals.
“With our economists anticipating another 150 basis points of rate cuts by mid-2025 and expecting the US economy to avoid a recession, we expect the focus to shift quickly to forward outlooks,” analysts at Morgan Stanley wrote.
Investors will get a look at JP Morgan and Wells Fargo earnings on Friday and that will guide the market into the weekend and also next week when other banks release their latest results.
