Wall St. Profits Surge Despite Questions About the Economy

JPMorgan Chase kicked off bank earnings season this morning.Credit…Eduardo Munoz/Reuters

What corporate earnings say about the economy

Earnings season is underway, with Wall Street giants flying out of the gate this on Friday. JPMorgan Chase, Wells Fargo and BlackRock have each reported results that soundly beat analysts estimates, lifting shares in premarket trading.

Quarterly financial reports in general should deliver a timely checkup on the economy. Corporate profit has held up well despite high inflation and high interest rates. But a number of companies have warned that customers are pulling back, signaling ongoing economic challenges.

The American consumer’s recovery “has been slower than we had anticipated,” Jamie Caulfield, PepsiCo’s C.F.O., told analysts this week. The most recent Times/Siena College poll bore this out: Three-quarters of respondents said the economy was in fair or poor condition, and nearly the same percentage said they sometimes forgo grocery purchases because of costs.

The major presidential candidates have sought to seize on this. Donald Trump has criticized the Biden administration as being responsible for an economic malaise. Meanwhile, Vice President Kamala Harris has made fighting corporate price-gouging a priority.

Analysts forecast a mixed earnings picture. Profit for S&P 500 companies is expected to grow for a fifth straight quarter, by 4.2 percent, according to FactSet.

But the financial sector will probably report that earnings per share fell by 0.4 percent during the same period. Despite Friday’s results, banks in general are getting hit by lower interest income, a consequence of Fed rate cuts, and higher loan-loss provisions, according to Gerard Cassidy, a banking analyst at RBC Capital Markets. There’s a potential bright spot, he added: an expected surge in investment banking revenue.