In the wake of a stunning after-hours announcement from JPMorgan Chase, the Fast Money traders say you may need to re-evaluate everything.
In an unexpected after-hours call with investors, CEO Jamie Dimon saidJPMorgan was facing massive losses — losses of $4.2 billion were reasonably possible, he said — with trading losses totaling $800 million in the second quarter.
Dimon also said it could take until the end of the year to restructure the portfolio.
Although information was still coming together at the time of writing, the Fast Money traders say developments look like they’re a game changer.
“This is the last thing the financials need,” said trader Steve Grasso.
“It’s going to raise questions — not only at JPMorgan, but across the entire industry,” added Joe Terranova. “It makes me wonder if there are other portfolios that need to be marked to market. Money pros will ask, what is the impact? And how far does it extend? Who else holds what appears to be lousy paper?”
And in this kind of environment, money pros tend to sell first and ask questions later.
“I will dump my(Bank of America) on this news,” Terranova said.
“I can almost guarantee it’s not just JPMorgan,” added trader Guy Adami.
“JPMorgan looks like it’s going to bring down the entire space,” said Steve Grasso.
In other words, all the traders are expecting financials to selloff broadly on Friday.
“The sector hasn’t been doing well anyway,” explained Steve Grasso. “The group has been breaking down. This feels like it could be a nail in the coffin.”
And it's not just these developments that will likely weigh on banks stocks.
Trader Keith McCullough pointed to another big risk in the space. “Chatter on the Street says Morgan Stanley is looking at a rating downgrade,” he said. That certainly doesn’t help.
If the financials do plunge on Friday, because the market is already nervous, Guy Adami cautioned that the ripple from this development could take the entire market down.
The level “1340 is now the bogie in the S&P 500 — if the S&P breaks that level, you should revaluate everything you own,” Adami said.