Financials Weigh on the Dow Jones Today as JPMorgan’s Earnings Come up Short

JPMorgan's earnings were down 20%, pulling Visa, Goldman Sachs, and the DJIA down with it

Apr 11, 2014 at 1:33PM

JPMorgan Chase (NYSE:JPM) is leading the Dow Jones Industrial Average (DJINDICES:^DJI) lower as the nation's largest bank's disappointing earnings bode ill for the financial sector as a whole. As of 1:25 p.m. EDT the Dow is down 117 points to 16,053. The S&P 500 (SNPINDEX:^GSPC) is down 10 points 1,823.

JPMorgan Chase is down 3.1% after reporting that first-quarter income dropped 20% year over year to $5.3 billion, or $1.28 per share, missing analyst expectations of $1.40 per share.

Revenue was down 8% year over year from $25.8 billion to $23.8 billion, well below analyst expectations of $24.5 billion. With interest rates far higher this quarter than where they were last year, mortgage originations fell 68% year over year to $17 billion as fewer people bought houses or refinanced their mortgages.

10 Year Treasury Rate Chart

10 Year Treasury Rate data by YCharts.

Also contributing to the 8% drop in overall revenue was a drop in bond trading revenue, down 21% year over year to $3.8 billion, and consumer banking revenue, which fell 25% from the prior-year quarter.

As the U.S.' largest bank, JPMorgan is a bellwether for the rest of the financial sector. Thanks in part to the company's poor earnings, the rest of the Dow's financial stocks are dropping today. Visa and Goldman Sachs are also among the Dow's worst performers today, and because of their relatively high stock prices, they're having an outsize impact on the index. Goldman's drop can be attributed to JPMorgan's weaker-than-expected results, as Goldman is heavily dependent on its fixed-income and commodities group. While Goldman is largely seen as a more skilled trader than JPMorgan, Goldman faces the same market dynamics as JPMorgan, so its fixed-income unit likely did not do much better than JPMorgan's.

Visa, on the other hand, has been moving in line with the market for the past few days, and I wouldn't attribute its move to JPMorgan's earnings. In fact, credit card activity was actually one of the bright spots in JPMorgan's earnings: The bank reported that credit card sales volume was up 10%.

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Dan Dzombak can be found on Twitter @DanDzombak or on his Facebook page, DanDzombak. He has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs and Visa. The Motley Fool owns shares of JPMorgan Chase and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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