Earnings in the Zone: Banks

Hey 5-Star Trader,

We’ve entered April, and that means bank earnings are coming up soon. 

Bank earnings are critical because these set the tone for earnings season as a whole. When bank earnings go badly, it sends a shockwave through the market. 

Here is a screenshot of JPMorgan (JPM) in the “Hot Zone.”

 There are a couple of notable factoids here: 

  1. JPM has traded lower since they reported earnings last quarter. 
  2. JPM has traded lower the past four quarters after reporting earnings, despite beating estimates.
  3. JPM is near recent lows going into earnings.

JPMorgan is one of the most important bank stocks set to report, and all eyes will be on the banks, especially in light of rising interest rates. But, rising interest rates isn’t the only focus this quarter. Investors will also be focused on how many companies note an inflationary impact. For JPM in particular, this could show up in the form of the number of loans they are writing, in addition to how consumer spending is impacting the credit card side of the business. Banks are often some of the first companies to note an impact in consumer spending, as they can see on their end how much consumers are either cutting back or ramping up spending on a rapidly changing basis. 

Additionally, banks will also note how much retail trading activity has ramped up or down. Last year and the year before, JPM was able to capitalize on a flood of retail traders into the market, but I am betting this won’t be the case this quarter. When the market corrects, normally interest in investing by retail traders wanes. If it wanes this quarter, those numbers will be reflected in JPM corporate profits in the trading segments of the business. 

As you can see, there are headwinds for not just Chase bank, but all of the banks this quarter. These headwinds, on top of an already lackluster showing in the stock price this ticker, is not boding well for this company, this sector, or the market in general. 

Remember, banks are a catalyst and set the tone for the flavor of earnings season. If banks put a bad taste in investors’ mouths – look out below!

Want to learn more about how earnings season provides opportunities? Join me tomorrow and April 7th for my exclusive earnings live trading sessions. Learn more HERE!

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