TLDR
- S&P 500 futures gained 0.1% Friday morning after hitting record highs, driven by strong retail sales and jobs data
- Major banks reported better-than-expected earnings with low consumer delinquency rates and stable credit conditions
- Consumer spending rose faster than expected in June while jobless claims fell below forecasts
- Bank executives expressed optimism about economic health despite policy uncertainty from tariffs
- Investment banking pipelines remain strong at major firms like JPMorgan and Morgan Stanley
The S&P 500 built on its record highs Friday morning as investors remained confident about the U.S. economy. Futures tracking the Dow Jones Industrial Average rose 54 points, or 0.1%, while S&P 500 futures climbed 0.1%.
Strong economic data released Thursday helped fuel the market rally. Retail spending in June increased at a faster pace than economists predicted.
Consumer Health Remains Strong
The latest batch of bank earnings delivered positive news about American consumers. JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo all reported low consumer delinquency rates that were either stable or improving from a year ago.
“While there are nuances around the edges, consumer credit is primarily about the labor market,” JPMorgan Chief Financial Officer Jeremy Barnum told analysts. With unemployment at 4.1%, he said it would be difficult to see weakness in their loan portfolio.
Banking Sector Shows Resilience
The four largest U.S. banks posted strong quarterly results that exceeded Wall Street expectations. Five of the six major lenders, including Goldman Sachs and Morgan Stanley, reported higher profits compared to the same period last year.
Bank of America’s investment banking revenue fell 9% from a year ago, but the decline was smaller than CEO Brian Moynihan had warned about earlier. The bank’s CFO Alastair Borthwick said momentum “built across the quarter with a good pipeline.”
The strong economic data could influence Federal Reserve policy decisions. Signs of a healthy consumer might support keeping interest rates at current levels despite pressure from President Trump to reduce them.
Fed Governor Christopher Waller broke ranks with Chairman Jerome Powell on Thursday. He called for the central bank to cut borrowing costs when it meets later this month.
Initial jobless claims for last week came in below economists’ expectations. This data helped reassure investors that the consumer sector remains resilient.
Deutsche Bank macro strategist Jim Reid said the figures showed “a growing sense of the U.S. economy continuing to run hot.” The positive momentum continues despite approaching tariff deadlines.
Investment Banking Activity Improves
JPMorgan’s investment banking pipeline “remains robust, and the outlook along with the market tone and sentiment is more upbeat,” according to Barnum. Morgan Stanley also reported healthy investment banking pipelines with active client dialogues.
The dealmaking environment showed improvement during the quarter. This came as a relief to analysts who had feared weaker activity in the sector.
Despite strong earnings, bank stocks showed mixed performance on their reporting days. Wells Fargo dropped 5% even after beating earnings estimates because the bank said net interest income would be lighter than investors hoped.
JPMorgan, Bank of America, and other major banks also slipped on their earnings announcement days. This occurred after the banking sector had already experienced a meaningful rally.
The yield on the 10-year U.S. Treasury note fell 1 basis point to 4.44% in early trading. The U.S. dollar declined 0.3% against a basket of major currencies.
Gold prices increased 0.2% to $3,352 per troy ounce. These moves reflected investor confidence in the economic outlook.
Bank executives remained cautiously optimistic despite the positive results. Wells Fargo and Bank of America highlighted weakness in commercial real estate loan portfolios, particularly office properties.
Citigroup CEO Jane Fraser noted she was monitoring tariff effects on the economy. She expects goods prices to increase over the summer as tariffs take effect and has seen pauses in capital expenditures and hiring among clients.
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