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Is Weakness Already Priced into Banks?

JPMorgan and Alcoa : what do they have in common? 1) They're the first large companies to report Q3 earnings, and 2) both had very low expectations going into their earnings.

With Alcoa, analysts were expecting lower aluminum prices, higher costs, and a cautious, murky outlook to weigh on results. They did.

But the poor showing from Alcoa did not infected the rest of the market today, not even other material stocks.

With JPMorgan, analysts have been expecting lower trading revenue, lower investment banking fees, lower asset management fees, and lower net interest margins.

As with Alcoa, JPMorgan will likely deliver the lower numbers and cautious outlook.

This will be an interesting test of the market: if JPMorgan comes in light and gives a cautious outlook, how much it will weigh on other financials?

The betting seems to be that banks are already priced for a challenging outlook.

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