Did JP Morgan Just Restart the Bull Run?

JPMorgan Chase CEO, Jamie Dimon

Thought the post-Christmas rally was over?

Not so fast, say JP Morgan (NYSE: JPM) and Disney (NYSE: DIS) – two market leaders that sent the indexes soaring on huge daily gains.

The Dow climbed 275 points shortly after Friday’s open while the S&P 500 rose 0.7%, prodded along by a strong showing from the energy and financial sectors. Even the NASDAQ Composite got in on the fun, gaining 0.5% in just a matter of minutes.

And it all got started by JPM’s sterling pre-market earnings report, the first major report of the upcoming earnings season.

JP Morgan CEO Jamie Dimon was pleased to inform investors of an earnings beat this morning, saying that revenue exceeded estimates by roughly $1.5 billion. He claims that much of the progress made over the last quarter was thanks to the “impact of higher rates,” and that his company’s record-setting net income numbers were a sign of continued economic strength:

“Even amid some global geopolitical uncertainty, the U.S. economy continues to grow, employment and wages are going up, inflation is moderate, financial markets are healthy and consumer and business confidence remains strong.”

Wall Street, encouraged in equal parts by both JPM’s earnings and Dimon’s guidance, celebrated the news, buying-up JP Morgan shares en masse. Analysts expect to see similar reports from other major banks in the coming weeks.

“A solid 1Q19 beat should be good news for the shares of both JPM and its universal bank peers,” stated Jeffery Harte, an analyst at Sandler O’Neill & Partners.

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He continued, saying that his firm “specifically see[s] a positive read through for universal bank peers from JPM’s FICC and debt underwriting revenue beats.”

As of midday, JPM gains currently hover around 4%, at a new 3-month high.

But not to be outdone, Disney leadership had some paradigm-shifting news of their own. Shortly after JPM’s earnings call, Disney reps announced key details about their upcoming streaming service, set to release on November 12th, 2019.

As a direct competitor to Netflix, Disney+ (the name of the new service) will likely be the go-to entertainment option for cord-cutting families, at a modest price of only $6.99 a month. Paid annually ($69.99 a year), subscribers can save even more cash.

Netflix (NASDAQ: NFLX) shares dropped shortly after the announcement in pre-market trading, as Disney looks poised to take a huge chunk out of the streaming market with their new offering. Disney+ subscribers will be getting almost the same service that Netflix provides, but at roughly half the price.

Disney CEO Bob Iger admitted that the pricing model they’re going with won’t be profitable at first, but over time, they hope to claim enough market share to make streaming worth their while. Currently, the company expects Disney+ to produce profits by 2024.

That might seem a long way off, and an excruciatingly long time to fund a loss-leading venture. But these days, in order to compete with the industry’s top dogs, you’ve got to deliver unparalleled value – often times while enduring sizable up-front costs.

It’s worked for Amazon and Jeff Bezos, who arguably made the model that Disney, along with many other companies, are now using.  Some have been rewarded greatly for their efforts, while others (like MoviePass) crashed and burned.

But overall, it seems as though the economy will continue to support companies that attempt to replicate “Amazon-like” growth. JP Morgan’s earnings call this morning likely confirmed a bullish earnings season, and that the rally could continue even further – befuddling scores of analysts who insist that the market is ready for a major correction.

Because as long as investors keep seeing consistent growth from American blue-chips, they’ll keep buying.

And yes, trade talk out of China could still stand to spoil 2019’s early gains. But even then, if the economy continues to roar, the stock market would undoubtedly recover.

So long as the Fed leaves interest rates alone, that is.

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