U.S. Bank Earnings Impress but Stocks Remain Flat

In December 2017 the Trump administration managed to push through the U.S. Tax Cuts and Jobs Act. This slashed the corporate tax rate from 35% to 21% in the United States. The hype surrounding the tax reform package caused U.S. indexes to soar, but this has not been the case in 2018.

U.S. bank stocks have been huge beneficiaries, and this was made evidence in first and second-quarter results. However, shares have not regained the momentum seen in 2017 and early 2018. Trade tensions have also sparked general anxiety.

JPMorgan Chase & Co. (NYSE:JPM) stock was up 1.62% in early afternoon trading on July 20. Shares are up 2.7% in 2018 so far. The bank released its second-quarter results on July 13. JPMorgan reported a record second-quarter profit of $8.32 billion which was up 18% from Q2 2017.

Loans beat expectations and rose 4% to $948.4 billion. Trading revenue also surged past analyst expectations as it climbed 13% year-over-year to $5.4 billion. JPMorgan trading revenues actually got a boost from general volatility that was sparked by trade concerns.

Goldman Sachs Group Inc. (NYSE:GS) stock was up 0.78% in early afternoon trading on the same day. Shares have dropped 9.8% in 2018 so far. It released its second-quarter report on July 17.

Earnings shattered estimates, rising to $5.98 per share as company-wide revenue increased 19% to $9.4 billion. Goldman’s investing and lending division saw revenues climb 23% to $1.94 billion.

The big banks continue to impress in the aftermath of the corporate tax cut. This is encouraging looking long, but the worsening trade war with China and the possibility of auto tariffs being imposed in the fall could usher in a new round of volatility.