The stock market once again seemed to tread water on Tuesday as investors tried to assess what the future looks like for the broader U.S. economy. As of 11:20 a.m. EDT, the Dow Jones Industrial Average (DJINDICES:^DJI) was up 14 points to 27,377. However, the S&P 500 (SNPINDEX:^GSPC) was down 3 points to 3,011, and the Nasdaq Composite (NASDAQINDEX:^IXIC) fell 9 points to 8,249.
Earnings season began in earnest today, with several big banks reporting their second-quarter results. In particular, JPMorgan Chase (NYSE:JPM) and Goldman Sachs (NYSE:GS) had encouraging news for their shareholders, and even though not everything is pointing to robust growth in the future, shareholders in these two banks were pleased with the way the financial giants are capitalizing on their latest opportunities.
JPMorgan deals with lower rates
Shares of JPMorgan Chase climbed 1% as investors reacted favorably to its second-quarter earnings results. The Wall Street bank delivered better bottom-line performance than market participants had expected, but there were some countervailing factors that kept the report from getting an even better reception.
On the plus side, JPMorgan reported a 16% return on equity, with an even stronger 20% return on tangible common equity. This shows JPMorgan's ability to focus on its most lucrative business opportunities, and it helped contribute to the bank's decision to boost its dividend by 12.5% to $0.90 per share every quarter and to implement a $29.4 billion stock repurchase program as part of its recently approved capital plan.
However, JPMorgan also suffered from pockets of weakness. Average total loans across the company were up just 2% year over year and actually fell 1% from the first quarter of 2019. Consumer loans were down 2%, with a 7% drop in home lending offsetting a solid gain in credit card loans. Revenue for the corporate and investment banking segment was also down significantly.
Perhaps most troubling was JPMorgan's reduction in guidance for the full year. The bank now expects its net interest income to be $57.5 billion, down half a billion dollars from its previous projections. If the Federal Reserve moves forward with interest rate cuts more aggressively than the market expects, then that number could fall even further -- and if it does, it will pose a threat to a key source of income for banking giant.
Goldman heads higher
Shares of Goldman Sachs did better, rising almost 2%. The investment bank's second-quarter report included some encouraging results and also featured a dividend increase.
Goldman said that its earnings were substantially higher than what investors had expected, helping to support the company's decision to boost its dividend by 47% to $1.25 per share on a quarterly basis. Return on equity of 11.1% was substantially less than JPMorgan's figures, but Goldman saw more growth in its key segments. In particular, the Marcus consumer banking business saw double-digit percentage gains, pointing to the success of the offering.
Elsewhere, Goldman got help as well. Investment assets under management reached record levels, and upticks in merger and acquisition activity and stock offerings helped bolster the company's core investment banking business. Slightly weaker revenue in its institutional client services segment weighed on overall performance, but much of that was due to losses in the fixed income arena stemming from the unexpected reversal of the anticipated future direction of interest rates.
All in all, both banks had pluses and minuses in their reports. Even though the stocks rose due to favorable results, the uncertainty in their outlooks will force investors to keep their eyes on the financial sector for the remainder of the year to see if it can help sustain growth for the broader economy.