Record bank earnings, coinbase moment

Banks

Earnings season started with record results from the big banks that showed investment banking and trading are strong and that the party will go on for a couple more quarters.  JPMorgan and Wells Fargo were downbeat on the current loan demand environment and that could temporarily hurt some retail banks.

JPMorgan’s best quarter on record, alongside an outsized reserve release, and expected short-term struggles with loan growth, provided many traders a reason to take some profit off the table.  Financials have been on fire as EPS growth is expected to top 65.6% this earnings season.

JPMorgan benefited from a USD5.2 billion reserve release that was possible due to the improving outlook.  Many traders focused on the warnings over lending and that the housing market would start to slow as interest rates rise.

Regarding where stimulus money is going, JPMorgan is seeing about 30% go into savings and the majority going towards debt repayment.

Goldman Sachs results were a grand slam.  Deal-making and strong trading made this a record-setting quarter. Equity underwriting quadrupled, equities trading came in over a billion dollars higher than analysts’ forecast, with Net revenue impressing at USD17.7 billion much higher than the USD12.55 billion consensus estimate.

Looking ahead, Bank of America has a high bar set for capital market performance with many traders focused on how they are positioned for what might end up being an even longer expected low-interest rate environment.

Coinbase

Cryptocurrency traders were not surprised with how the debut went for Coinbase.  The largest US crypto exchange opened at USD381, shortly testing the USD400 level and rallying above USD420 within the first seven minutes of trade.  Leading up today, everything exposed to crypto was rallying.  Bitcoin has survived years of skepticism and today’s coinbase debut is an exclamation point that cryptocurrencies are here to stay.

Today, bitcoin, ethereum and many altcoins surged ahead of the coinbase IPO which ultimately will deliver more ‘use cases’ for cryptos and should keep the crypto market growing.  Initial rallies with Tesla and MicroStrategy were short-lived after coinbase indicated to open at USD340 a share, much higher than the reference price of USD250. Bitcoin pared gains, as many crypto traders put their funds to work with the coinbase trading debut.  Today’s bitcoin volatility seems minor given the historic proportions of what today could mean for the cryptoverse.  The end result for today, however, could be that the coinbase trading debut triggers a ‘buy the rumor, sell the event’ type reaction for all crypto-exposed stocks.

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