Markets Await JPMorgan 'Whale' Report—And Friday the 13th
Financial bellwether JPMorgan is in the spotlight Friday, as it reveals details of its controversial derivatives trading loss along with second-quarter earnings.
From the size of the trading loss to comments on consumer lending, JPMorgan results will be picked over for what they say about the bank as well as the industry.
Analysts expect JPMorgan to take anywhere from a $4 to $6 billion hit on the trading loss, resulting from a trade put on by the so-called “whale”—or major trader—in its London office.
Since the trade was made, executives at the unit have left the firm and JPMorgan CEO Jamie Dimon has apologized. Dimon will host a call after the release, and he is expected to be peppered with questions on the big loss as well as the Libor scandal rocking the international banking community.
“He’s (Dimon) going to be the first in the U.S. to be grilled on it,” said Mark Luschini, chief investment strategist at Janney.
Wall Street is also watching to see what Dimon says about reports the bank will claw back millions of dollars in stock from executives involved in the losses, and whether the group could include himself.
JPMorgan is expected to report a profit of 72 cents a share and revenue of $21.899 billion.
Wells Fargo also reports ahead of the opening bell.
Besides bank earnings, there is PPI inflation data at 8:30 a.m. ET and consumer sentiment at 9:55 a.m.
The superstitious may also be noting that Friday is the 13th day of July.
“I’m looking for a rally tomorrow. It’s Friday the 13th. You get a 60 percent chance of being to the upside tomorrow and the market’s oversold,” said Art Cashin, director of floor operations at UBS.
Cashin said the markets too will be digesting the China GDP and other data released overnight. But a key focus will be JPMorgan, and traders Thursday were betting its results would not surprise negatively, he said.
JPMorgan stock finished the day slightly lower as did Wells Fargo and other financials.
“Wells Fargo, everybody assumes, is going to be the good kid on the block, and JPMorgan is going to go out of its way to remove the black eye it got with the whale,” he said.
Anton Schutz of Mendon Capital says he is watching to see what Dimon might say about the Libor scandal.
Libor is the London Inter Bank Offered Rate, and regulators on both sides of the Atlantic are investigating allegations the banking industry manipulated the rate during the financial crisis. Barclays settled U.S. and U.K. charges, and both its chairman and CEO wereforced to resign.
“It becomes a political football. They had fun with it in London. They haven’t done anything with it in the U.S. yet. You have J.P. Morgan, you have Citi, you have Bank of America all setting these rates,” said Schutz. “Even if they didn’t do anything wrong, there will be plaintiffs’ attorneys crying foul, because if you did a derivative and you agreed to pay fixed and you agreed to receive Libor, you overpaid.”
“It may come up in a Q & A but I would think that the lawyers would probably tell him to avoid it, but then again he is Jamie Dimon,” said Cashin.