Financial exchange traded funds were higher in Thursday’s preopen trading after JP Morgan (NYSE: JPM) reported profit that topped analyst expectations as credit losses moderated.
Quarterly results late this week from JP Morgan and Citigroup (NYSE: C) will set the pace for bank earnings season and sector ETFs.
JP Morgan on Thursday said its second-quarter earnings rose to $1.27 a share, while analysts were looking for $1.21 a share. Revenue also came in higher than expected at $27.4 billion while trading results were solid.
JP Morgan shares rose more than 2% before the opening bell.
Improving credit trends at JP Morgan are a probable sign of “relief” for most banks’ second-quarter reports, Miller Tabak analysts said Thursday.
“If other banks report second-quarter credit trends similar to JP Morgan’s, we expect regional bank stocks to rally on the ‘relief’ news,” they wrote in a report. “We can’t be sure JP Morgan’s experience will prove typical, but, as a probable leading indicator, it’s a positive sign.”
JP Morgan continues to deliver strong results in “what seems like a mixed trading environment (at best),” Deutsche Bank analysts added.
Some strength in investment banking is making up for some seasonally weak fixed-income trading, reports Rouhan Sharma for Morningstar.
“We expect the issues facing the sector … to continue with loan growth remaining muted and weak investment banking revenues. Offsetting these negatives, we see credit quality continuing to improve and as we have more clarity on new capital levels,” according to a Doleman Securities report. [Will Mortgage Settlement, Card Fees, Revive Financial ETFs?]
Financial Select Sector SPDR Fund (NYSEArca: XLF) was up 0.7% in premarket trading Thursday. The financial ETF invests 8.8% of assets in JP Morgan and 6.5% in Citigroup. The iShares Dow Jones U.S. Financial Services Fund (NYSEArca: IYG) is another large financial sector ETF. [Financial ETF Fails Test as Bank of America Sets New Low.]
Financial Select Sector SPDR Fund
Tisha Guerrero contributed to this article.