All eyes are on the start of the earnings season as investors look at who the winners and possible losers are during the pandemic and the reopening of economies. Leading the way are the big bulge bracket banks, and they don’t come much bigger than JP Morgan who we previewed earlier today. Banks are important for two reasons - firstly, they have outperformed the general market by some threefold this year, and their profits are set to benefit from rising yields that have been a key theme of 2021.

JPM posted first quarter profit of $4.50 per share including a $1.28 per share benefit from the reserve release. This was way higher than $3.01 per share expected by analysts. It looks like traders ruled the roost too as the venerable investment bank saw revenues surge to $33.12 billion with trading operations alone producing $1.8 billion more than forecast.

JPM is the world’s biggest Wall Street bank by total revenue and was set to benefit from robust investment banking fees driven by record issuance of special purpose acquisition companies, (SPACs) which saw more activity in the first quarter than all of 2020, itself a record year.

However, results were overshadowed by weak loan demand and crucially, executives warned that US consumers were not going and spending their most recent stimulus checks, instead tucking these funds away in savings or to pay down debts. This is particularly significant as while most analysts expect another blowout quarter of earnings, it is the forward guidance that is important for the wider market. The stock is down close to 0.8% today which may be a sign of things to come.

Global risk mood positive

Elsewhere, sentiment is constructive with the S&P marking new ground and European bourses very close to all time highs. The dollar is suffering, post the “not too hot” US inflation numbers and the negative J&J vaccine news. After breaking 92 support yesterday, the DXY look to have rolled over as we suggested and we should see more downside towards the next line of support at the mid-March lows at 91.31.

Nasdaq pulls back at the highs

It’s been a rollercoaster in many ways regarding the leadership of the stock markets with cyclicals battling with the interest-rate sensitive and stay-at-home tech stocks. The Nasdaq made new highs yesterday but is struggling to push on today. Investors will turn to earnings for the FAANGs in due course, so the index needs to decisively break above 14,000 to continue higher.

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