The JP Morgan surprise raises questions about the health and regulation of U.S. banks, which have been outperforming the broader market in 2012. XLF is up 15.6% year to date, compared with an 8.9% gain for iShares S&P 500 (NYSEArca: IVV).
The bank said that it could face another $1 billion in losses in the second quarter due to market volatility.
“While the announcement on its surface is shocking, especially considering J.P. Morgan’s stellar reputation when it comes to risk controls, we do not anticipate the losses will be material to JP Morgan’s long term fair value,” said Morningstar analyst Erin Davis. “We are, however, monitoring the situation closely for signs that this could be an early indication of larger problems at the bank.”
Financial Select Sector SPDR