What's going on?
JP Morgan, the massive US bank, released its first quarter results on Wednesday. It performed better than expected – albeit expectations were low – and the stock rose almost 5%.
What does this mean?
One thing to keep in mind is that investors had re-set their expectations for JP Morgan’s profits quite a bit lower in the past month or so. So “beating expectations” is a bit of a misnomer. However, the results showed that the bank had a strong month in March, so investors are perhaps betting that the stronger performance will carry over into future months – and that’s probably part of the reason the stock rose so much.
Why should I care?
For the market: Bank stocks have had a tough 2016 – so far. Prior to Wednesday, JP Morgan’s stock was down more than 10% this year while its biggest rivals were down even more. The sector has been hit with a whammy of concerns, from fines for past bad behavior to souring loans made to energy companies (amongst other reasons). Investors appear to have taken JP Morgan’s news as positive for the sector as a whole and it could represent an inflection point for the banking sector.
The bigger picture: The health of the US consumer is uncertain – and that’s a concern for everyone. JP Morgan’s CEO said the US consumer was healthy, but economic data out on Wednesday was more negative: Americans are buying less stuff, which is bad for the economy. As the US economy is a big driver of global economic growth simply due to its size, the recent apparent weakness of the US consumer is a concern for investors globally.