With stocks down today, it appears many investors are taking a cautious approach to this current environment. Earnings season has just begun, with several large banks kicking off the festivities. At first glance, some investors may take some solace in the numbers reported, at least when it comes to those of JPMorgan Chase (NYSE:JPM).
JPMorgan reported a record annual profit of $49.6 billion, with the company’s loan margins and acquisition of First Republic Bank driving these strong tailwinds. Unfortunately, for JPMorgan’s rivals Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC) and Citigroup (NYSE:C), results came in much less rosy and were mixed across the board.
In fact, Citigroup reported a net loss in the fourth quarter. It also announced a round of layoffs in a bid to cut costs and restore profitability. With layoffs continuing to make headlines across various sectors and other large banking rivals incorporating similar strategies, the outlook for this sector (often viewed as a bellwether for the economy) remains uncertain.
Let’s dive more into what’s driving investor sentiment today.
Why Are Stocks Down Today?
These bank results may not necessarily reflect the performance of other sectors of the economy. However, with the American economy reliant on lending, one could argue that these results reflect a much broader view of the economy and should be treated as such.
Additionally, with more economic data being released, there’s conflicting messaging from the numbers with respect to how inflation is cooling. This week’s CPI print came in hotter than expected, but today’s producer price index numbers were softer than expected. Thus, with oil prices on the rise again, there’s plenty of mixed data to digest, and the market appears to be doing so cautiously.
As more earnings roll in and additional economic reports are released, I expect more volatility to arise in the coming months. While we haven’t seen the VIX reflect this sort of uncertainty, I think at some point, a bifurcation in the market will build as investors gravitate toward quality. In the banking sector, JPMorgan appears to be the outright winner, at least for now, and could be indicative of what we see in other sectors moving forward.
