Financial stocks and sector-related exchange traded funds rallied Thursday and pushed the broader S&P 500 and Dow Jones Industrial Average to new highs as J.P. Morgan’s (NYSE: JPM) earnings beat helped set the pace for second quarter expectations.
JPM shares rose 1.8% Thursday after revealing a much better-than-expected increase in second quarter revenue. Excluding accounting adjustment and legal benefit, earnings were $1.55 per share or 12 cents higher-than-expectations. Revenue also climbed to $25.2 billion, compared to estimates of a $24.2 billion average, the Wall Street Journal reports.
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“We saw strong underlying performance with record consumer deposits, credit-card sales volume, merchant processing volume and broad core loan growth” fueled by mortgages and commercial real estate, Chief Executive Officer Jamie Dimon said in a statement.
The earnings beat helped financials outperform other S&P 500 sectors Thursday, with the Financial Select Sector SPDR (NYSEArca: XLF) up 0.8% and the sub-sector-specific SPDR S&P Bank ETF (NYSEArca: KBE) up 1.6% – KBE also popped back above its 200-day simple moving average. JPM makes up 2.5% of KBE’s underlying portfolio and 7.9% of XLF.
[related_stories]“We saw a significant beat from JPMorgan and that’s helping the psychology of the market,” Art Hogan, chief market strategist at Wunderlich Securities, told Reuters.
J.P. Morgan kicks off the earnings season for U.S. banks and sets the tone for the industry. Looking ahead, Wells Fargo (NYSE: WFC) and Citigroup (NYSE: C) will report earnings on Friday while Bank of America Corp. (NYSE: BAC), Goldman Sachs Group Inc. (NYSE: GS) and Morgan Stanley (NYSE: MS) are due next week
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Analysts anticipate the industry will post its fourth-straight profit decline in the second quarter after the group posted a 12% decline in profits year-over-year in the first quarter.
Financial Select Sector SPDR