Jamie Dimon and other Wall Street titans say the US economy is strong for now, but warn about the future

US markets were higher in midday trading as investors celebrated a slew of strong second-quarter earnings results.

Some of the largest banks in the country — JPMorgan Chase, Wells Fargo and Citigroup — kicked off the official start to earnings season on Friday morning, and their rosy results buoyed markets.

The strong earnings follow a week full of encouraging economic data. Reports on Wednesday and Thursday showed easing US inflation while new jobless claims data on Thursday showed the labor market remains resilient.

The Dow was up 199 points, or 0.4%, in midday trading on Friday.

The S&P 500 gained 0.1%

The Nasdaq was 0.2% higher.

JPMorgan Chase and Wells Fargo, the largest lenders in the United States, saw mortgage lending fall in the second quarter of 2023.

Home lending revenue for JPMorgan Chase came in at $1 billion (excluding revenue from their recent acquisition of First Republic Bank). That's 23% lower than it was last year.

The bank said the change was largely driven by smaller earnings on the interest the bank charged on loans. JPMorgan Chase earned less both from managing existing loans and creating new ones.

Wells Fargo, meanwhile, reported that home lending was down 13% since last year, since fewer people are taking out mortgages in this high interest rate environment, the bank said. It also cited lower earnings on interest.

New mortgages declined 77% from a year ago, the bank said.

Consumer sentiment surged in July as inflation continued to ease, according to the latest survey from the University of Michigan.

The university's Consumer Sentiment Index rose to 72.6%, compared to estimates of 65.5%.

"The sharp rise in sentiment was largely attributable to the continued slowdown in inflation along with stability in labor markets," said Joanne Hsu, director of the university's Surveys of Consumers.

"Sentiment is now about halfway between the all-time historic low of 50 from June 2022 and the February 2020 pre-pandemic reading of 101," she said in a statement released Friday morning.

US stocks rallied on Friday morning, opening higher after the country’s largest banks reported strong second-quarter earnings.

Robust corporate earnings from JPMorgan Chase and Wells Fargo, up 1.1% and 2.7% respectively, boosted banking sector stocks and lifted markets along with them. 

All major indexes are on track to notch a winning week, following signs that inflation is cooling more than expected.

Since March 2022, the Federal Reserve rolled out 10 consecutive interest rate hikes to tame inflation, finally hitting the pause button last month. The Fed is still widely expected to raise rates by another quarter point when it meets later this month, but investors have been buoyed by the latest news. 

Both the Nasdaq and S&P 500 reached their highest levels of the year on Wednesday after the Consumer Price Index showed that consumer prices eased in June.

The labor market, meanwhile, remains resilient, giving investors hope that a soft landing – where the Fed brings down inflation and avoids a recession – is possible. 

In corporate news, shares of Alcoa fell by 3.6% after JPMorgan downgraded shares of the aluminum company, warning of upcoming downward pressure on aluminum prices. 

UnitedHealth Group’s stock also grew by 3.4% after beating on earnings. 

JPMorgan Chase CEO Jamie Dimon on Friday called out positives in the economy including resilient consumers but cautioned of dangers lurking that could still spark a downturn.

Asked by CNN if the inflation cooldown has made him more optimistic about avoiding a recession, Dimon acknowledged considerable uncertainty.

“I don’t know if it’s going to lead to a soft landing, a mild recession or a hard recession,” Dimon said during a call with journalists.

The JPMorgan Chase CEO cited “tailwinds” in the economy, including the strength of consumer spending amid fiscal and monetary stimulus.

“Those are receding over time,” Dimon said.

Headwinds, according to Dimon, include inflation, high US government debt, high interest rates, the Federal Reserve’s efforts to shrink its balance sheet and the war in Ukraine. He noted the war has been going on for 500 days and could still “get worse.”

Jeremy Barnum, JPMorgan’s chief financial officer, similarly expressed uncertainty over whether the Fed can achieve a soft landing for the US economy.

“Your guess is as good as ours,” Barnum told reporters, adding that there has been “a lot of euphoria about immaculate disinflation” in recent days but it’s too early to say. 

The JPMorgan Chase CFO was more confident about the state of the banking crisis, which has eased since the JPMorgan takeover of First Republic in early May.

“It seems like we are through the worst of it,” Barnum said.   

Citigroup on Friday beat top- and bottom-line expectations, solidifying big banks' auspicious kickoff to the second-quarter earnings season.

The bank reported second-quarter earnings of $2.9 billion, or $1.33 per share, compared to analysts' expectations of $1.31 per share, according to FactSet. Still, that's a 36% decrease from the same period a year ago, driven by higher expenses, higher cost of credit and a dip in revenue, according to the company.

Second-quarter revenue came in at $19.4 billion, slightly above expectations of $19.3 billion.

Shares rose about 0.7% in pre-market trading.

JPMorgan Chase, Wells Fargo and BlackRock also all beat earnings expectations for the second quarter.

A 10-day UPS strike could cost the US economy $7.1 billion. That could make it the costliest work stoppage ever in US history, according to an estimate from a Michigan economic research firm that studies the costs of labor disruptions. 

The estimate from Anderson Economic Group said the hit to businesses and consumers would be $4.6 billion by itself, causing "significant and lasting harm for small businesses, household workers, sole practitioners, and online retailers across the country."

Other costs include estimated direct losses at UPS of $816 million, as well as $1.1 billion in lost wages by 340,000 members of the Teamsters union at the company. The remaining costs would be borne by UPS suppliers and from lost tax revenue. 

The union has said it will go on strike August 1 without an agreement on a new contract. Talks broke off last week with both sides accusing the other of walking away from the table.

Gold prices edged lower on Friday morning after five straight days of gains.

Increased expectations of a pause in Federal Reserve rate hikes and a weakening dollar have set the precious metal on a rally and on course for its best week since April.

Strong bank earnings and a resilient economy, however, seeded some doubt about the Fed's next moves and knocked gold a bit lower on Friday. The gold spot market is currently down just under 0.1%.

Oil prices also fell early Friday morning, though they're on track for their third consecutive weekly increase. Brent crude fell 0.12% to $81.26 a barrel.

Stocks futures were mostly higher on Friday morning after big banks reported earnings beats for the second quarter.

JPMorgan Chase, Wells Fargo and BlackRock all reported second-quarter profits that surpassed analysts' expectations.

Dow futures rose 0.4%, S&P 500 futures added 0.08% and Nasdaq-100 futures edged down 0.05%.

Citigroup reports second-quarter earnings results at 8 a.m. ET.