JPMorgan Chase Smashes Q3 Earnings, But Cautions Investors

JPMorgan Chase CEO, Jamie Dimon

Non-tech stocks dipped slightly this morning as investors anxiously awaited more stimulus news. The tech-heavy Nasdaq Composite, meanwhile, ticked barely higher. With Apple (NASDAQ: AAPL) set to unveil its newest iPhone at 10 am PST, traders look ready to either buy or sell depending on how CEO Tim Cook’s presentation goes.

Many analysts think that the iPhone 12 announcement could be a huge win for Apple. Morgan Stanley’s Katy Huberty told clients that it will be “the most significant iPhone event in years.”

If it is, expect AAPL to soar again in the afternoon.

Casting a pall on equities today, however, is a recent coronavirus vaccine setback from Johnson & Johnson (NYSE: JNJ). The company said its vaccine candidate suffered an “adverse event” during a trial, which caused JNJ shares to drop 2%.

But besides stimulus, vaccines, and the iPhone 12, another major influence is coming for stocks:

Earnings season.

That’s right, at long last, corporate earnings are here. Much was made about the last earnings season in which most corporations outperformed their estimates.

Now, with a stagnant U.S. labor market and lack of stimulus, investors will want to see impressive numbers. JPMorgan Chase (NYSE: JPM) provided that in spades as one of the season’s first reports. The bank’s Q3 profit of $9.44 billion ($2.92 EPS) beat expectations, as did its $29.94 billion in revenues. Analysts predicted an EPS of just $2.23 by comparison. Fixed income and equity trading also exceeded estimates.

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In short, it was a great quarter for JPM. Other major banks should post similar Q3 results. Citigroup (NYSE: CITI) reported as well, mimicking JPM’s profits.

However, investors weren’t too keen on guidance from company leadership. Both banks said there’s still plenty of uncertainty left in regard to the coronavirus pandemic, which could diminish future earnings.

JPMorgan CEO Jamie Dimon even went so far as to say that his bank would need to maintain higher than normal cash reserves to safeguard unexpected loan losses “given significant economic uncertainty and a broad range of potential outcomes.”

Still, some analysts believe that investors will be rewarded with a strong crop of Q3 earnings from America’s top stocks.

“This hardly seems about ‘stimulus’ anymore. The S&P 500 index rallied back near all-time record highs today led by growth – the technology, communications, and consumer discretionary sectors.” explained Jim Paulsen, chief investment strategist at the Leuthold Group.

“Recently, the stock market has been rising whether news surrounding an additional stimulus package is good or bad, suggesting stocks are already responding to what will likely prove to be a wonderful quarterly earnings season.”

If the market gets what it’s asking for in terms of earnings, stocks could burst through to new highs. And if earnings aren’t so great, then vaccine progress or a stimulus package could pick up the slack.

Of course, every source of bullish sentiment could fall apart, plunging the market into a rapid correction.

But considering just how gung-ho bulls still are, bears seem to be in the less desirable position at present. Investors want a rally continuation and they’ll be looking for any reason to buy.

Even with a contentious presidential election – and several possible “sell triggers” – waiting for them in the near future.

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