Dow Jones outlook: Where next for JPMorgan stock ahead of Q2 earnings?

Josh Warner
By :  ,  Market Analyst

Key takeaways

  • JPMorgan has been one of the best performing bank stocks in 2023, although the industry has significantly underperformed the broader market
  • JPMorgan forecast to deliver faster earnings growth than most in the second quarter
  • Rising interest rates continue to boost income, countering soft conditions in trading and investment management
  • Provisions are rising as JPMorgan and other banks become more pessimistic over the economic outlook – keep an eye on loan growth and deposits
  • New capital requirements are on the way, and this could limit buybacks in the near-term
  • Size, scale and stability all go in JPMorgan’s favour in wake of the banking crisis, suggesting it could continue to outperform in the second half of 2023


JPMorgan Q2 earnings date and time

JPMorgan will report second-quarter earnings before US markets open on Friday July 14. A conference call is scheduled on the same day at 0830 ET.

Wells Fargo and Citigroup will also be reporting on the same day, with others including Bank of America, Morgan Stanley and Goldman Sachs reporting in the following week. You can find out what to expect from the industry as a whole in our US Banks Q2 Earnings Preview.



JPMorgan Q2 earnings consensus

JPMorgan is forecast to report EPS of $3.78 in the second quarter, up 37% from the $2.76 reported the year before.


JPMorgan stock: Q2 earnings preview

JPMorgan has been the best performer among the largest US banks in what has so far proven to be a troublesome 2023. It may have beaten all of its rivals, but it has still underperformed the broader market after rising just 7.4% since the start of the year.

JPMorgan was highly influential as the industry scrambled to help smaller peers that hit trouble when the banking crisis erupted back in March. It led a rescue attempt to save First Republic by injecting $30 billion of deposits that had been pooled from a group of major banks in the hope of convincing customers that the bank was sound. This ultimately failed and First Republic collapsed, joining the list of casualties that already included SVB and Signature Bank. Still, JPMorgan reaped rewards by snapping-up the majority of First Republic’s assets, including over $170 billion of loans, $92 billion of deposits and $30 billion worth of securities.

That means the largest bank in the US has gotten even bigger in 2023, with CEO Jamie Dimon touting it as a ‘pillar of strength in the banking system’ during a ‘period of heightened volatility and uncertainty’. The integration of First Republic’s assets will likely be a topic discussed during the conference call.

Its size and perceived stability means it has not suffered from the broader outflow of deposits that has been hurting the industry this year. Overall deposits have been flowing out of the regulated banking system since peaking in 2022. Keep an eye on the state of deposits to see if there are any signs of things stabilising or whether banks continue to lose a vital source of funding that fuels their lending operations.

Banks have benefited from rising interest rates as this boosts the amount of profit they make on loans and other forms of credit, improving their net interest margins. Net interest income is forecast to jump 39% from last year to $21.2 billion thanks to the fact interest rates have risen to over 5% today from less than 1% just over a year ago as the Federal Reserve tries to bring inflation down to its 2% target.

While rising interest rates are good for profitability, they can weigh on demand for loans as the price of servicing debt increases. JPMorgan has continued to see more customers need loans as individuals and businesses find things more difficult in the current environment and loan growth is forecast to come in over 10% in the second quarter, but a soft reading here could be a warning. The risk of a recession also increases the higher interest rates go, so the bank’s view on the economy will be closely-watched considering more rate hikes are on the way and any hopes of a pivot have been pushed firmly into 2024.

Other activities not tied to interest rates, known as non-interest income that is derived from activities like investment banking, trading and asset management, is forecast to rise 4.7% from last year to $17.6 billion. Notably, that will be solely driven by a surge in principal transactions revenue that comes from its trading and private equity investing activities and higher credit card income. That will counter a sharp fall in fees from its investment banking arm as demand for new listings, M&A deals and fundraisings all remain subdued in the current environment.

JPMorgan is forecast to book provisions, which represent the sums put away in case loans turn sour, of $2.62 billion in the second quarter. That will be more than double what was put aside the year before and the highest amount since the industry started squirreling money away again. This suggests JPMorgan is becoming increasingly pessimistic about the economic outlook, with other major banks also forecast to hike their provisions this quarter. A lower figure would suggest JPMorgan isn’t as worried about the state of the economy as the markets, while a higher than expected number would suggest the opposite.

A clean bill of health following the annual stress test conducted by the Federal Reserve last month has reinforced the view that the largest banks can withstand whatever lies around the corner. JPMorgan actually saw its stress capital buffer and CET1 ratio requirements fall, which paved the way for the bank to free up capital and raise its dividend for the third quarter to $1.05 from the $1 that will be paid for the second. That will shift attention to share buybacks. While the industry has been given the green light to return capital to investors, we may see some more limited buybacks over the short-term as regulators are poised to introduce tighter capital requirements in response to the banking crisis and from a review of international standards known as Basel III. That means they may not want to return large sums before knowing how much more money they will need to keep on their balance sheets.

‘We continue to maintain a fortress balance sheet with strong capital levels and robust liquidity, and we remain prepared for a broad range of potential outcomes, including potentially higher future capital requirements from the finalization of the Basel III capital rules,’ said CEO Jamie Dimon following the results of the stress test.


Where next for JPM stock?

JPMorgan shares hit their highest level in over 16 months earlier this month but have struggled to find higher ground since. Notably, the stock has moved back above the 61.8% retracement from the lows we saw last October, which could emerge as a new level of support or resistance.

A sustained move back above the recent highs of $146.60 would bring the 78.6% retracement at over $157 into view, which is aligned with the next set of peaks set back in February 2022.

We can see that the bank has been following a supportive trendline since bottoming-out late last year, suggesting it will step in again if JPMorgan stock suffers and reversal. Right now, that suggests $140 could provide some support if it comes under pressure.

Can JPMorgan stock keep outperforming its rivals in 2023?

Analysts at Jefferies raised JPMorgan to Buy today, stating it has a ‘stable’ earnings outlook and more diverse revenue streams than its smaller peers. The target price was hiked to $165 from $149, suggesting there is around 14% potential upside from current levels. That matches the $165 price target set by UBS yesterday after it upped its view from $157. Those recent upgrades are above the average target price of $161.80.

This suggests JPMorgan could continue to outperform its large rivals in the second half of 2023. Size, scale and stability are all in play this year and JPMorgan fits that bill. Plus, it is not the most expensive bank on the market and trading below historical levels, boasting only a small premium over the industry average.

However, banks could continue to underperform the broader market given the challenging economic backdrop. There is scope for others to race ahead of the bigger players like JPMorgan if small-to-mid sized regional banks can restore confidence and recover the heavy losses they have suffered this year.


Dow Jones analysis: Where next for the index?

JPMorgan is a constituent of the Dow Jones Industrial Average and its weighting, at around 2.8%, plus its role as a bellwether for the wider economy means its results will prove influential on how the index performs.

The index has formed a series of higher-lows since bottoming-out last September but it has struggled to set new highs in 2023. This has formed an ascending triangle pattern and we are waiting for it to breakout of this range to signal where it is headed next. Keep an eye on trading volumes to help confirm any breakout that occurs.

A sustained move above 34,570 could allow the index to climb back above the 35,000 threshold and climb above the 78.6% retracement from the lows we saw last year, with 35,300 the next target to recapture the peaks we saw over a year ago.

On the downside, there has been support found at 33,700, marking the 61.8% retracement level, which could be hit and keep the supportive trendline intact. There is a risk it could unravel back toward the 50% retracement level is the trendline fails and it comes under severe pressure.

We are waiting for the Dow Jones to breakout


Take advantage of extended hours trading

JPMorgan will release earnings before US markets open and most traders must wait until they open before being able to trade. But you can get ahead of the game by taking a position in premarket hours by taking advantage of our service that allows you to trade JPMorgan and other US banks like Wells Fargo and Bank of America using our extended hours offering.

While trading before and after hours creates opportunities for traders, it also creates risk, particularly due to the lower liquidity levels. Find out more about Extended Hours Trading.



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