Bank Earnings Mixed
Major banks kicked off the second-quarter earnings season with mixed results. JPMorgan Chase reported higher-than-expected revenue, driven by a jump in investment banking fees. However, its shares fell 2%. Citigroup beat expectations but saw its stock dip 3%. Wells Fargo tumbled 7% after reporting disappointing net interest income.
Market Rotation Continues
The recent market action suggests a rotation from large-cap tech stocks to small-caps. The Russell 2000 Index, representing smaller companies, surged more than 6% for the week. This shift could persist, as historical data indicates such rotations often continue for about four weeks.
Inflation Concerns Persist
Despite recent signs of easing inflation, JPMorgan Chase CEO Jamie Dimon warned of ongoing inflationary pressures. He cited factors such as large fiscal deficits, infrastructure needs, and global remilitarization as potential drivers of higher inflation and interest rates.
Market Forecast
The short-term outlook appears cautiously bullish. The S&P 500 is up 0.9% for the week, having reached another record close on Wednesday. The Dow’s 1.3% weekly gain reflects investors’ shift towards industrial names. However, valuations have become stretched, and any changes in price trends or labor market conditions could significantly impact the market.
Traders should closely monitor upcoming earnings reports and economic data for further indications of market direction. The ongoing rotation from large-cap tech to small-caps may present opportunities in the coming weeks, but caution is advised given the potential for continued volatility.