JPMorgan CEO Jamie Dimon and CFO Jennifer Piepszak said much of the pain of the recession is yet to come to banks as massive government stimulus efforts begin to ease.
“May and June are really easy months in terms of what this recovery will be like,” Piepszak said in a call with reporters. The actual damage, he said, will become apparent in the coming months.
Know this statistic: The bank is prepared for double-digit unemployment until the first half of next year. That would be much worse than the Federal Reserve’s projection that unemployment will drop to 9.3% for the fourth quarter of this year.
The KBW Bank Index, which tracks the largest lenders in the United States, lost 1.6% Tuesday after the results. But the S&P 500 still managed to add 1.3%, highlighting the disconnect between broader markets and what is unfolding in the real economy.
While Bank of America shares are down 31% this year, Goldman and Morgan Stanley have performed much better, and investment banks have benefited from the companies’ rush to take advantage of the equity and debt markets.
American companies raised a record $ 190 billion through the sale of shares during the second quarter, and banks raised money by negotiating the deals. JPMorgan’s investment bank fees soared 54% last quarter, a bright spot.
Vaccines expect Moderna shares to rise again
Investor excitement for a possible Covid-19 vaccine returns, triggering another round of stock gains as risky assets continue to push harder.
The first results are the first for a US vaccine candidate to be published in a peer-reviewed medical journal, in this case the New England Journal of Medicine.
The news caused Moderna’s shares to jump nearly 18% in pre-market trading. Later this month, the company is expected to begin a large Phase 3 trial, the final stage before regulators decide whether to approve the vaccine.
UBS analyst Navin Jacob called the latest data “positive,” but said Phase 3 results were necessary to determine the “clear winner” in the race for a vaccine.
Pfizer shares are up more than 4% this week, while BioNTech shares are up 19%.
The airline industry predicts a ‘choppy’ recovery
Perhaps most troubling is Delta’s outlook for the future, as the coronavirus resurgence in many US states is hitting demand again. The airline had planned to add 1,000 flights per day to its August schedule, but will now add just 500.
“We have thought from the beginning that the recovery will be choppy, and the past few weeks have shown that to be true,” CEO Ed Bastian told analysts on Tuesday.
That’s not as bad as the 150 orders canceled in March and 108 in April. But after the canceled orders fell to just 18 in May, it’s a move in the wrong direction.
Remember: Air industry losses are expected to exceed $ 84 billion this year, according to the International Air Transport Association. Air travel is not expected to recover to 2019 levels until at least 2023.
Until next time
Also today:
- United States industrial production data for June arrives at 9:15 am ET.
- The OPEC ministerial panel that makes production recommendations meets to discuss how much oil to pump after July.
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