Jamie Dimon and other Wall Street titans say the US economy is strong for now, but warn about the future

US markets were higher in midday trading as investors celebrated a slew of strong second-quarter earnings results.

Some of the largest banks in the country — JPMorgan Chase, Wells Fargo and Citigroup — kicked off the official start to earnings season on Friday morning, and their rosy results buoyed markets.

The strong earnings follow a week full of encouraging economic data. Reports on Wednesday and Thursday showed easing US inflation while new jobless claims data on Thursday showed the labor market remains resilient.

The Dow was up 199 points, or 0.4%, in midday trading on Friday.

The S&P 500 gained 0.1%

The Nasdaq was 0.2% higher.

New homes line a street in Eagleville, PA, on April 28.

JPMorgan Chase and Wells Fargo, the largest lenders in the United States, saw mortgage lending fall in the second quarter of 2023.

Home lending revenue for JPMorgan Chase came in at $1 billion (excluding revenue from their recent acquisition of First Republic Bank). That’s 23% lower than it was last year.

The bank said the change was largely driven by smaller earnings on the interest the bank charged on loans. JPMorgan Chase earned less both from managing existing loans and creating new ones.

Wells Fargo, meanwhile, reported that home lending was down 13% since last year, since fewer people are taking out mortgages in this high interest rate environment, the bank said. It also cited lower earnings on interest.

New mortgages declined 77% from a year ago, the bank said.

Shoppers peruse product displays through a Costco warehouse on July 11 in Sheridan, CO.

Consumer sentiment surged in July as inflation continued to ease, according to the latest survey from the University of Michigan.

The university’s Consumer Sentiment Index rose to 72.6%, compared to estimates of 65.5%.

“The sharp rise in sentiment was largely attributable to the continued slowdown in inflation along with stability in labor markets,” said Joanne Hsu, director of the university’s Surveys of Consumers.

“Sentiment is now about halfway between the all-time historic low of 50 from June 2022 and the February 2020 pre-pandemic reading of 101,” she said in a statement released Friday morning.

US stocks rallied on Friday morning, opening higher after the country’s largest banks reported strong second-quarter earnings.

Robust corporate earnings from JPMorgan Chase and Wells Fargo, up 1.1% and 2.7% respectively, boosted banking sector stocks and lifted markets along with them. 

All major indexes are on track to notch a winning week, following signs that inflation is cooling more than expected.

Since March 2022, the Federal Reserve rolled out 10 consecutive interest rate hikes to tame inflation, finally hitting the pause button last month. The Fed is still widely expected to raise rates by another quarter point when it meets later this month, but investors have been buoyed by the latest news. 

Both the Nasdaq and S&P 500 reached their highest levels of the year on Wednesday after the Consumer Price Index showed that consumer prices eased in June.

The labor market, meanwhile, remains resilient, giving investors hope that a soft landing – where the Fed brings down inflation and avoids a recession – is possible. 

In corporate news, shares of Alcoa fell by 3.6% after JPMorgan downgraded shares of the aluminum company, warning of upcoming downward pressure on aluminum prices. 

UnitedHealth Group’s stock also grew by 3.4% after beating on earnings. 

The Dow was up 163 points, or 0.5%, on Friday morning.

The S&P 500 grew by 0.3%.

The Nasdaq Composite was also 0.3% higher.

Jamie Dimon pictured during a Senate Banking, Housing, and Urban Affairs Committee Hearing on the Annual Oversight of the Nation's Largest Banks, on Capitol Hill in Washington, DC, in September 2022. 

JPMorgan Chase CEO Jamie Dimon on Friday called out positives in the economy including resilient consumers but cautioned of dangers lurking that could still spark a downturn.

Asked by CNN if the inflation cooldown has made him more optimistic about avoiding a recession, Dimon acknowledged considerable uncertainty.

“I don’t know if it’s going to lead to a soft landing, a mild recession or a hard recession,” Dimon said during a call with journalists.

The JPMorgan Chase CEO cited “tailwinds” in the economy, including the strength of consumer spending amid fiscal and monetary stimulus.

“Those are receding over time,” Dimon said.

Headwinds, according to Dimon, include inflation, high US government debt, high interest rates, the Federal Reserve’s efforts to shrink its balance sheet and the war in Ukraine. He noted the war has been going on for 500 days and could still “get worse.”

Jeremy Barnum, JPMorgan’s chief financial officer, similarly expressed uncertainty over whether the Fed can achieve a soft landing for the US economy.

“Your guess is as good as ours,” Barnum told reporters, adding that there has been “a lot of euphoria about immaculate disinflation” in recent days but it’s too early to say. 

The JPMorgan Chase CFO was more confident about the state of the banking crisis, which has eased since the JPMorgan takeover of First Republic in early May.

“It seems like we are through the worst of it,” Barnum said.   

Jane Fraser, CEO of Citi, at the 2023 Milken Institute Global Conference in Beverly Hills, California, on May 1.

Citigroup on Friday beat top- and bottom-line expectations, solidifying big banks’ auspicious kickoff to the second-quarter earnings season.

The bank reported second-quarter earnings of $2.9 billion, or $1.33 per share, compared to analysts’ expectations of $1.31 per share, according to FactSet. Still, that’s a 36% decrease from the same period a year ago, driven by higher expenses, higher cost of credit and a dip in revenue, according to the company.

Second-quarter revenue came in at $19.4 billion, slightly above expectations of $19.3 billion.

Shares rose about 0.7% in pre-market trading.

JPMorgan Chase, Wells Fargo and BlackRock also all beat earnings expectations for the second quarter.

UPS workers go through a rehearsal of a pending strike at the UPS Customer Center on July 13 in Longwood, FL.

A 10-day UPS strike could cost the US economy $7.1 billion. That could make it the costliest work stoppage ever in US history, according to an estimate from a Michigan economic research firm that studies the costs of labor disruptions. 

The estimate from Anderson Economic Group said the hit to businesses and consumers would be $4.6 billion by itself, causing “significant and lasting harm for small businesses, household workers, sole practitioners, and online retailers across the country.”

Other costs include estimated direct losses at UPS of $816 million, as well as $1.1 billion in lost wages by 340,000 members of the Teamsters union at the company. The remaining costs would be borne by UPS suppliers and from lost tax revenue. 

The union has said it will go on strike August 1 without an agreement on a new contract. Talks broke off last week with both sides accusing the other of walking away from the table.

Read more here.

An oil pumpjack casts a shadow on a wall as it pulls oil from the Permian Basin oil field on March 14, 2022 in Odessa, Texas. 

Gold prices edged lower on Friday morning after five straight days of gains.

Increased expectations of a pause in Federal Reserve rate hikes and a weakening dollar have set the precious metal on a rally and on course for its best week since April.

Strong bank earnings and a resilient economy, however, seeded some doubt about the Fed’s next moves and knocked gold a bit lower on Friday. The gold spot market is currently down just under 0.1%.

Oil prices also fell early Friday morning, though they’re on track for their third consecutive weekly increase. Brent crude fell 0.12% to $81.26 a barrel.

Stocks futures were mostly higher on Friday morning after big banks reported earnings beats for the second quarter.

JPMorgan Chase, Wells Fargo and BlackRock all reported second-quarter profits that surpassed analysts’ expectations.

Dow futures rose 0.4%, S&P 500 futures added 0.08% and Nasdaq-100 futures edged down 0.05%.

Citigroup reports second-quarter earnings results at 8 a.m. ET.

Jamie Dimon, Chairman of the Board and Chief Executive Officer of JPMorgan Chase & Co., during an interview in Miami, Florida, in February.

American consumers are still powering the US economy, which “continues to be resilient,” said JPMorgan Chase CEO Jamie Dimon in a statement Friday.

“Consumer balance sheets remain healthy, and consumers are spending, albeit a little more slowly,” Dimon said, while noting that consumers’ cash buffers are slowly being drained.

While job growth remains strong, he said there are still “salient risks in the immediate view,” including stubborn inflation, the risk of more rate hikes from the Federal Reserve, and geopolitical tensions.

“While we cannot predict with any certainty how these factors will play out, we are currently managing the Firm to reliably meet the needs of our customers and clients in all environments,” he said.

He also welcomed “our new First Republic colleagues,” after acquiring the bank earlier this year when it collapsed.

A Wells Fargo bank branch in New York, on Monday, July 3.

Wells Fargo saw its profits soar in the second quarter of 2023, earning $4.9 billion — about 57% more than it did over the same period last year, or the equivalent of $1.25 per share.

Analysts had expected the bank to earn just $1.16 per share, according to data from FactSet.

Revenue also grew by 20% from Q2 last year, coming in at $20.5 billion. Analysts had predicted the bank would bring in $20.1 billion.

The company did note that it set aside a $1 billion provision for loss loans in its commercial real estate business.

Wells Fargo CEO Charlie Scharf had warned at a conference in May that there would be losses from US office loans as the commercial real estate business struggles to recover from a pandemic-induced slowdown.

“We look city by city, we look property by property to look at our exposures, and I would say there’s no question that there will be losses,” Scharf said at the conference, hosted by AllianceBernstein.

Wells Fargo’s stock popped by about 1% in premarket trading, following its earnings release. It’s up about 5.9% so far this year.

The bank is expected to hold an earnings call and presentation at 10 a.m. ET.

BlackRock on Friday beat earnings expectations for its latest quarter.

The world’s largest asset manager, with $9.4 trillion, reported second-quarter diluted earnings of $9.06 per share, or $9.28 adjusted, compared to expectations of $8.52 per share, according to FactSet.

The company reported revenue of about $4.5 billion, falling slightly below expectations.

The JPMorgan Chase headquarters building is seen on May 26 in New York City.

JPMorgan Chase reported record revenue for another quarter.

The nation’s biggest bank reported $41.3 billion in revenue, surpassing expectations of $38.7 billion for the second quarter.

The economic bellwether reported earnings of $14.5 billion, or $4.75 per share, compared to analysts’ expectations of $3.97 per share, according to FactSet.

Earnings were about $4.37 per share excluding significant expenses like JPMorgan’s purchase of First Republic, after the regional lender collapsed earlier this year.

JPMorgan Chase reported first-quarter profit and record revenue that roundly beat expectations.

Shares rose roughly 3% in premarket trading.

People walk past the New York Stock Exchange on Wall Street on July 11.

After four straight days of gains, stock futures started the day slightly lower on Friday, ahead of second-quarter earnings from America’s biggest names in banking.

Markets closed higher on Thursday as investors cheered a cooler-than-expected Producer Price Index report for June that showed wholesale inflation continued its yearlong slowdown last month, rising by just 0.1% for the 12 months ended in June.

That came after the Nasdaq Composite and S&P 500 reached their highest levels this year on Wednesday, after encouraging Consumer Price Index data for June.

Market watchers are expecting downbeat earnings, with a projected decline of 7.6% for companies listed on the S&P 500, compared to the prior year, according to FactSet.

The Nasdaq-100 index, which comprises 100 of the largest non-financial companies listed on the exchange, is getting a facelift this month.

That’s because just seven companies currently account for roughly 51% of the index.

Those top seven stocks, Amazon, Apple, Alphabet, Meta Platforms, Microsoft, Nvidia and Tesla, dubbed by some the Magnificent Seven, have skyrocketed this year on artificial intelligence buzz.

They have also driven the lion’s share of the market’s rally this year, although that run has widened in recent weeks to include a more diverse basket of stocks.

The huge gains mean that these big tech stocks have become bloated in some indexes, which are often weighted by market capitalization. That can pose a problem to investors, since it leaves the market vulnerable to large swings driven by just a handful of companies.

So the tech-heavy index will undergo a “special rebalance,” which will “address overconcentration in the index by redistributing the weights,” Nasdaq said in a press release.

Nasdaq won’t remove or add any stocks to the index during this rebalance, according to the release.

Customers line up outside a Wells Fargo branch in a neighborhood of Los Angeles in April 2020.

The second-quarter earnings season kicks off on Friday with results from big banks including JPMorgan Chase, Citigroup, Wells Fargo and BlackRock.

While big banks reported mostly solid results for the first quarter after the collapses of Silicon Valley Bank and Signature Bank, investors will be watching for insights into how much credit conditions have tightened and the impact that this has had on the economy.

The health of American consumers, who have spent robustly despite persistent inflation and the Federal Reserve’s interest rate hikes, will also be a key focus.

Analysts have a low bar for second-quarter earnings results. The projected earnings decline for companies listed in the S&P 500 is roughly 7.6% compared to the prior year, according to FactSet.

That would be the third consecutive quarter of declines and the largest earnings decline reported by the broad-based index since a roughly 32% loss during the second quarter of 2020.

Big banks aren’t excluded from those low expectations.

“We believe Q2 2023 has been challenging for most banks, with worries about rising rates curtailing loan demand, rising credit loan risk exposure, and uncertainties on bank policy and regulation following the three bank failures in March,” wrote Kenneth Leon, director of equity research at CFRA, in a research note.

A worker monitors the processing of tortilla chips at a factory in San Bernardino on June 29.

 Wholesale inflation continued its yearlong slowdown last month, rising by just 0.1% for the 12 months ended in June, according to the Bureau of Labor Statistics’ Producer Price Index released Thursday.

The PPI index, a key inflation gauge that tracks the average change in prices that businesses pay to suppliers, has cooled significantly since peaking at 11.2% in June 2022 and has now declined for 12 consecutive months. Annual producer price inflation is at its lowest level since August 2020, BLS data shows.

On a monthly basis, prices increased by 0.1%.

Prices for services — which increased 0.2% from May — were the primary driver behind June’s slight increase.

PPI is a closely watched inflation gauge since it captures average price shifts before they reach consumers and is a proxy for potential price changes in stores.

While the PPI index doesn’t directly correlate into exactly what will come from the following month’s Consumer Price Index — a major inflation gauge that tracks price shifts for a basket of goods and services — it provides a look at whole economy inflation, minus rents, said Alex Pelle, Mizuho Securities US economist.

And that picture right now is looking pretty sharp.

“It’s definitely a good month for inflation,” Pelle told CNN. “You saw that in CPI, and now you’re seeing it in PPI.”

In June, inflation as measured by the CPI cooled to 3% annually, its lowest rate since March 2021, the BLS reported Wednesday.

In an aerial view, homes stand in front of the Oakland-San Francisco Bay Bridge on June 9 in San Francisco, California. 

US mortgage rates climbed higher this week, inching closer to 7% and reaching their highest level since November.

The 30-year fixed-rate mortgage averaged 6.96% in the week ending July 13, up from 6.81% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed-rate was 5.51%.

Mortgage rates have remained over 5% for all but one week during the past year and even went as high as 7.08%, last reached in November. Rates had been coming down and were under 6.5% for most of the spring.

“Incoming data suggest that inflation is softening, falling to its lowest annual rate in more than two years,” said Sam Khater, Freddie Mac’s chief economist. “However, increases in housing costs, which account for a large share of inflation, remain stubbornly high, mainly due to low inventory relative to demand.”