Bank Earnings Indicate Strong Economy; IBM Drops Dragging Software; Warsh Says No Tolerance For Inflation

Cooler Inflation Data Please click here for an enlarged chart of JPMorgan stock (JPM).

Note the following: This article is about the big picture, not an individual stock.

The chart of JPM stock is being used to illustrate the point.

JPMorgan is important because it is the largest bank in the U.S.

Overall, earnings from five banks this morning indicate a strong U.S. economy.

The chart shows JPM stock has fallen below the low band of zone 1 (resistance).

The chart shows that in the longer term, after a meteoric rise, JPM stock has been range bound between zone 2 (support) and zone 1(resistance).

In our analysis, the stock market’s reaction to JPMorgan earnings is particularly insightful.

JPMorgan reported blowout earnings significantly better than the consensus and whisper numbers, and yet, the stock has dropped in the early trade.

Normally stocks go up when they report better than whisper numbers.

The reason for the drop is JPM stock is very expensive and projections are lower than expectations.

Here are the details.

JPMorgan reported Q2 adjusted EPS of $6.14 vs. $5.80 consensus.

JPMorgan reported revenue of $57.3B vs. $51.3B consensus.

Excluding markets, JPMorgan expects FY26 net interest income of about $96.5B vs. prior view of $103B.

As full disclosure, JPMorgan is in our portfolio, long from an average of $34.14.

Bank of America Corp (NYSE: BAC ) also reported strong earnings, but BAC stock is trading lower.

Here are the details: Bank of America reported Q2 EPS $1.21 vs. $1.12 consensus.

Bank of America reported revenue of $31.56B vs. $30.77B consensus.

As full disclosure, BAC is in our portfolio, long from an average of $7.69.

Citigroup Inc (NYSE: C ) also reported strong earnings, but C stock is trading lower.

Here are the details: Citigroup reported Q2 EPS of $3.15 vs. $2.71 consensus.

Citigroup reported revenue of $24.8B vs. $23.73B consensus.

As full disclosure, C is in our portfolio, long from an average of $33.80.

It is trading at $139.37 as of this writing in the premarket, representing a gain of 312%.

Goldman Sachs Group Inc (NYSE: GS ) and Wells Fargo & Co (NYSE: WFC ) also reported better than consensus earnings.

In our analysis, strong earnings from large banks is positive for the entire stock market.

Consumer Price Index (CPI) came cooler than expected.

Here are the details: Headline CPI came at -0.4% vs. -0.1% consensus.

Core CPI came at 0.0% vs.

0.2% consensus.

In our analysis, after the cooler CPI data, there is over 80% probability that the Fed will keep interest rates unchanged.

In our analysis, falling oil prices has helped inflation cool down.

However, investors need to look ahead.

Oil prices are rising again as the U.S. and Iran resume low level warfare.

The Strait of Hormuz is practically closed even though the U.S. says it is open.