US stock futures traded flat as investors assessed earnings reports from major Wall Street banks and awaited inflation data that could impact expectations for Federal Reserve rate cuts. The S&P 500 and Nasdaq Composite snapped a seven-day winning streak on Thursday, with a rotation out of tech stocks towards utilities and real estate.
Earnings from JPMorgan Chase, Wells Fargo, and Citigroup were in focus, with JPMorgan's profit surging but Wells Fargo missing estimates. Investors are now debating the extent and timing of potential Fed rate cuts.
Big banks like JPMorgan Chase, Citigroup, and Wells Fargo saw a boost in their investment banking fees and trading revenue in the second quarter, indicating a revival on Wall Street. However, higher interest rates and elevated deposit costs ate away at their traditional consumer banking margins, leading to a decline in net interest income.
The banks also set aside more money for future loan losses, signaling expectations of worsening credit conditions. The nation's largest banks, JPMorgan Chase and Wells Fargo, reported earnings that were impacted by stubborn inflation.
Both banks saw declines in overall deposits and had to increase interest rates paid on checking and savings accounts, which is good for borrowers but not for the banks. Wells Fargo's net interest income fell 9%, while JPMorgan reported losses from offloading sinking mortgage investments, though its investment banking and trading business helped bolster overall results.
The banks' earnings provide clues about the state of the economy, with warnings about mounting credit-card unpaid balances and risks from commercial real estate investments.
