JPMorgan Chase is the IBD Stock of the Day as shares trade tightly while financials enjoy a new tailwind from Fed Chair Jerome Powell's dovish views.
New York-based JPMorgan is the nation's largest bank and a well-performing stock in its own right. The stock is up nearly 23% year to date and near all-time highs. JPMorgan stock rose 1.6% Friday after Powell signaled that the Federal Reserve may resume rate cuts next month.
While the stock market in general cheered the news, a drop in the fed funds rate stands to benefit financials as the yield curve steepens. That tends to increase the net interest margin, or the difference between the interest income banks earn on loans and the interest banks pay on deposits.
Even before Powell's remarks, Wells Fargo upgraded the financial sector to "most favorable."
"We believe a wider spread between short- and long-term interest rates, along with fiscal stimulus from the recently passed tax bill and more favorable regulatory environment, should benefit the S&P 500 Financials sector," the bank said in an Aug. 5 note to clients. The sector should outperform the index as the economy pushes through tariff impacts.
JPMorgan Stock Performance
JPMorgan Chase, however, doesn't have to rely much on the yield curve because it has extensive trading, investment banking and other lines of business.
In its second-quarter report, the bank's investment banking fees increased 7% year over year, while markets revenue increased 15%. Average deposits were down 1%, but average loans climbed 1%. Revenue and earnings beat expectations, although net interest income slightly missed views.
Analysts' consensus earnings estimate for the full year is $19.37 a share, an increase of 6.3%, according to FactSet. That would be slower growth than the 16% and 18% gains in the two previous years. Revenue is expected to climb 1.6% this year to $180.447 billion.
Last week, JPMorgan Chase agreed to pay $330 million to settle litigation over a Malaysian sovereign-wealth fund. Malaysia had sued JPMorgan's Swiss unit, accusing the bank of facilitating payments from the 1MDB state investment fund to a fraudulent joint venture.
JPMorgan Stock Analysis
JPMorgan has an IBD Composite Rating of 88. That's the eighth highest among 22 stocks in the money center banking group. Most leading stocks have Composite Ratings of at least 90. The bank has a three-year EPS growth rate of 19%, according to IBD Stock Checkup.
The stock has been finding support at the 10-week moving average, creating a follow-on entry around 293. In addition, the stock formed a three-weeks-tight pattern that offers another buy point at 301.29, the previous high.
Although shares are up about 85% from a December 2023 breakout, JPMorgan reset its base count when it created a 28%-deep double-bottom base that undercut the previous base. The double-bottom was a first-stage base.
JPMorgan stock has a 21-day average true range (ATR) of 1.79%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.
With the S&P 500 and Nasdaq now in a power trend, investors can buy stocks with ATRs up to 8%, to a moderate degree.
