Major US banks slide despite record JPMorgan Chase result

US equities are lower today driven weak sentiment into the weekend on more Covid-19 restrictions in several countries and slow pace of vaccination across the world. The big Biden $1.9trn stimulus plan should have been a major boost to the equity market but instead consensus has arrived at the point that it will end up much smaller in size. While this first stimulus plan for the new administration might end up being smaller the stimulus is not over as the slowdown in the US economy warrants more fiscal impulse which the US Congress will realize over the coming months. In other words, a lot of selling today is most likely risk reduction into the weekend and technically driven instead of a logical discount of the future which holds more stimulus until the economy is out of the woods. So today the reflation trade is not doing well.

Today is also the first major Q4 earnings release day with four major US banks reporting earnings. JPMorgan Chase delivered record quarterly net income of $11.9bn (47% y/y increase) up significantly from $2.59bn in Q1 driven steadily by releasing loan loss reserves as the global fiscal stimulus has avoided the worst-case scenario for banks on their loan portfolio. JPMorgan Chase is also lifting its 2021 guidance on net interest income by around 2% in a sign of a more upbeat outlook for the economy and the yield curve. Despite the positive result JPMorgan Chase shares were pulled down by the overall market trading 2.5% lower in early trading.