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JPMorgan Chase headquarters in New York.
Nina Westervelt/Bloomberg
JPMorgan
Chase has historically been considered a bellwether for financial stocks when it posts quarterly earnings. But on Monday, the banking giant’s Investor Day spurred a sector rally.
The
SPDR S&P Bank
ETF (ticker: KBE) was up 3.3% in midday trading, outpacing the1.7% gain in the
S&P 500 index
,
which has been near bear-market territory.
Among the sector’s top performers were JPMorgan (JPM), which saw shares climb 7.6%, putting it on pace for its best day since Nov. 9, 2020, when stocks soared on positive vaccine data.
Monday’s jump comes after the bank lifted its 2022 net-interest-income guidance to $56 billion, up from a previously forecast $53 billion. JPMorgan said it expects to benefit from high single-digit loan growth and rising interest rates.
That’s good news for peers. While JPMorgan is a leader in many of the markets it operates in—investment banking, consumer, and commercial lending to name a few—it isn’t considered as rate sensitive as some of its peers. Meanwhile,
Bank of America
(BAC), perhaps the most rate sensitive of the big banks, saw shares soar 6.6% in midday trading;
Wells Fargo
(WFC) shares rose 6%.
JPMorgan also said it expects its return on tangible common equity—a measure of profitability—to hit 17% this year, something it was unsure of earlier this year.
The rosy outlook is just what bank stocks needed to hear. This year was supposed to be a boon for bank stocks with expectations that the Federal Reserve would lift interest rates. The sector held up remarkably well during the pandemic thanks to a surge in deal making and trading, but 2022 was expected to see bank stocks gain on a return to their bread-and-butter business: lending money at interest rates that are higher than what they pay to borrow.
Instead, the market has been fretting that the Fed—in an effort to tamp down inflation—will raise rates too quickly and will force the economy into a recession. Higher rates don’t help banks as much when customers are afraid to borrow or unable to make payments.
But in Monday’s presentation, JPMorgan reiterated the financial health of its customer base, pointing to healthy balance sheets while also saying the U.S. economy remains “fundamentally strong”—despite recent noise. Still, the bank isn’t taking lightly the challenges the economy is facing—war in Ukraine, inflation, and the Fed tightening.
“Strong economy, big storm clouds,” CEO Jamie Dimon said Monday, referring to economic risks. “I’m calling them storm clouds because they’re storm clouds, they may dissipate. If it was a hurricane, I would tell you that.”
Investors on Monday were banking on Dimon’s forecast being correct.
Write to Carleton English at carleton.english@dowjones.com