Finance

Morning Market Roundup: JPMorgan Trade Loss Grows, Wholesale Prices up, Mortgage Apps Boost Wells Fargo

Here’s what’s important the business world this morning:

JPMorgan: JPMorgan Chase said Friday that a bad trade had cost the bank $5.8 billion this year, almost triple its original estimate, and raised the prospect that traders had improperly tried to conceal the blunder.

“This has shaken our company to the core,” CEO Jamie Dimon said.

The bank said managers tied to the bad trade had been dismissed without severance pay and that it planned to revoke two years’ worth of pay from each of those executives.

JPMorgan said it had lost $4.4 billion because of the trade from April through June, and its chief financial officer said the bank had lost an additional $1.4 billion in the first three months of the year.

Dimon’s original estimate of the loss from the bad trade, disclosed in a surprise conference call with Wall Street analysts on May 10, was $2 billion.

Wells Fargo: Wells Fargo’s net income and revenue rose in the second quarter, driven by a pickup in lending and a decline in the amount of bad loans.

The San Francisco-based bank reported an 18 percent increase in net income Friday, to $4.4 billion, compared with $3.7 billion in the same period a year ago.

On a per-share basis, the bank earned 82 cents, in line with estimates of analysts polled by FactSet. Revenue of $21.3 billion was also in line with analysts’ expectations.

The past two months have been vicious for the broader banking industry, which has been hit by accusations of interest-rate fixing, downgrades by the Moody’s ratings agency, and a surprise trading loss at JPMorgan Chase.

Wells Fargo has largely managed to avoid those problems. Its own earnings announcement was overshadowed by JPMorgan, which started a two-hour conference call at 7:30 a.m. to explain its $4.4 billion trading loss to analysts and investors.

U.S. Wholesale Prices: U.S. wholesale prices rose only slightly last month, as higher costs for food and pickup trucks offset another drop in energy prices. But overall inflation stayed mild.

The Labor Department says the producer price index increased 0.1 percent in June, after a steep drop of 1 percent in May. In the past 12 months, wholesale prices have risen 0.7 percent, the same as in May.

Excluding the volatile food and energy categories, core prices rose 0.2 percent. A 1.4 percent rise in the cost of pickup trucks – the biggest in more than a year – drove core prices higher.

In the past twelve months, core prices are up 2.6 percent, slightly below May’s 2.7 percent increase.

U.S. Futures: Stock futures headed higher as two major U.S. banks posted quarterly earnings Friday and JPMorgan revealed that losses from an embarrassing trading misstep had grown to $4.4 billion, more than double its original estimate of $2 billion.

The nation’s largest bank also said that it would be forced to restate first-quarter earnings, lowering net income by $459 million, after discovering new information that “raises questions about the integrity” of values placed on some of its trades.

Dow Jones industrial average futures added 40 points to 12,542. Standard & Poor’s 500 futures rose 4 points to 1,333.20 and Nasdaq futures gained 10.25 points to 2,548.

The Associated Press contributed to this report.

Comments (10)

  • 321481
    Posted on July 13, 2012 at 12:08pm

    So they “created” a derviative and classified it in their accounting system and we know on at least one of their quaterlies it was reflected on it. So where was their internal audit as a minimum? There should have been a flag go up on the based on the word, “derviative”, then any new created account should have to go thru a review process to make sure it is accurately costed, classified and legal. But that’s me, call me “old fashioned”. But still, if we don’t ever bail out the banks again, it is a problem of the stockholders, those that have accounts in excess of the FDIC limit and indirectly the FDIC which will have to pay significant claims. If we continue to reward banks for risky behavior it matters to all taxpayers.

    Report Post »  
    • lukerw
      Posted on July 13, 2012 at 12:51pm

      Seems like! There is Dirt here… and everyone desires to ignore it! No one understands the actual validation process of a Derivative… and one could be very Valid… but the Vast Issue of these things and the interlinking of Swaps is a NIGHTMARE… where if (when) the EU goes down, it will take our Banking System, and Federal Reserve, with it.

      DOOMSDAY!

      Report Post » lukerw  
  • 321481
    Posted on July 13, 2012 at 11:10am

    The problem with this continuation of the risky trading in derivatives is that those nit wits in DC have a history of bailing them out. This happened on a big scale and was covered up in JPM. Dimon went public with this when it was discovered, but what about other banks that this is happening in that are still undisclosed.

    Yes, if we do not bail these banks out again, it is none of our business, but they seem to be still indulging in this risky practice and our politicans are still prone to bail them out. Some how we need to strongly communicate with the banks that they either sink or swim on their own or what happened in 2008 will repeat again and again.

    Report Post »  
    • lukerw
      Posted on July 13, 2012 at 11:22am

      It is more likely that this is Not an Investment… but a JPMorgan created Derivative… otherwise it would be described as a bad Swap!

      Report Post » lukerw  
    • KC1
      Posted on July 13, 2012 at 12:13pm

      Im sure Romney “an economic genius of a candidate IMO” realizes that bail outs not only prolong but exacerbate the inevitable market correction. He has expressed very strong and consistent opinions about auditing the Fed and eventually abolishing the entire central bank, returning us to a free market system. He has always said that the Fed and artificial interest rates are at the root of the problem. I know for an absolute FACT that there is no chance the Tea Party would support a candidate that advocates the very same issues the Tea Party was formed to protest. If that were the case this election would really be about voting for a candidate that is intentionally ruining the economy and one who is unintentionally going to ruin the economy with the exact same policies. Luckily I believe Romney knows better, everyone should look up Romney on the house floor warning about the collapse of the housing market in 01…

      Report Post »  
  • lukerw
    Posted on July 13, 2012 at 10:22am

    The JPMorgan “trade” is tied into Derivatives… which do not simply Cease… and the 2 Billion loss, now 5.8 Billion, may well continue to Grow!

    Report Post » lukerw  
    • MODEL82A1
      Posted on July 13, 2012 at 10:35am

      Are you a JPM shareholder? If so, vote your shares or sell if you’re overly concerned. If not, their trading loses are NONE OF YOUR BUSINESS.

      Report Post » MODEL82A1  
    • Chromo200
      Posted on July 13, 2012 at 10:46am

      MODEL82A1 .. It does if it affects my other investments and they run to the Feds and ask for a bailout.

      Report Post »  
    • MODEL82A1
      Posted on July 13, 2012 at 10:51am

      CHROMO, and IF the queen had balls, she’s be king. What IF you someday decide to rob my house? Maybe you should be investigated now, just to be safe.

      Report Post » MODEL82A1  
    • lukerw
      Posted on July 13, 2012 at 11:07am

      @MODEL…
      Testie today? Pound some BMGs!

      Report Post » lukerw  

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