Pre-market actions: Big bank profits are on Wall Street, not Main Street

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Interest rates are at historically low levels, which affects their ability to earn money from loans. Americans and many businesses are strapped for cash, increasing the prospect of significant credit losses. And the economic outlook remains extremely uncertain.

More JPMorgan Chase (JPM), the largest American lender, just declared a profit of 9.4 billion dollars between July and September, up 4% on the previous year – raising the expectations of analysts on Wall Street.

What happened? For starters, JPMorgan is benefiting from a large market boom that has encouraged companies to sell debt and stocks and consider mergers.

Profits jumped 52% to $ 4.3 billion last quarter at JPMorgan’s corporate and investment bank. The investment bank’s income soared 12% as a wave of IPOs and bond sales pushed up share and debt underwriting costs.

The image of Main Street was a little more muddled. As mortgage income has jumped as Americans rushed to take advantage of low interest rates, people are spending less on credit cards – and the bank continues to worry about the economy.“There is still a lot of uncertainty,” Jennifer Piepszak, CFO of JPMorgan, said on a conference call. “We still have 12 million unemployed”.

Citi (C) Also announced on Tuesday that its trading and investment banking revenues had increased, helping the bank to generate $ 3.2 billion in profits. Unlike JPMorgan, that’s a massive 34% drop from last year – though it’s still remarkable that Wall Street’s top players can make money in today’s environment.

Investor insight: Banks are successful, but their stocks are taking a beating. Shares of JPMorgan Chase are down 28% this year, while Citi is down 45%.

Watch this space: JPMorgan has chosen not to build its cushion to guard against loan losses. That’s a good sign, which means he thinks he’s prepared enough for what’s to come.

But CEO Jamie Dimon said a “decent stimulus package would help” and reduce the chances of a painful double-dip recession.

It’s right in: Count Goldman Sachs Among Banks Making Tons Of Money From Market Gains. The investment bank said on Wednesday that its profit nearly doubled last quarter to $ 3.6 billion.

These companies are still burning money

Businesses that have been hit hard by the coronavirus pandemic are still burning money after months of tension – and some are warning they can’t go on for long.

The latest: AMC Theaters, the world’s largest movie theater chain, could run out of money by the end of the year, reports my CNN Business colleague Frank Pallotta.

The company said this week that its cash resources would be “largely depleted” by the end of 2020 or early 2021. It blamed the “reduction of the film list for the fourth quarter”, as well as “l ‘absence of a significant increase in attendance compared to the current one. levels. ”

AMC said there are only two ways out of the crisis: either more customers start buying tickets, or it has to find new ways to raise funds. Both options pose problems.

Option 1: AMC had reopened 494 of its nearly 600 US theaters to limited capacity as of October 9. But people are still hesitant to go and watch movies. Attendance at US theaters is down 85% from last year.

Option 2: The company is looking at additional debt financing, renegotiations with owners, and even potential asset sales. However, AMC warned of “a significant risk that these potential sources of liquidity do not materialize or that they are insufficient” to generate the necessary liquidity for their passage.

Delta Airlines (OF) is also losing millions every day as travel remains depressed. Despite being in better shape than AMC, the carrier told investors on Tuesday that it will likely burn between $ 10 million and $ 12 million a day by the end of the year. The company expects to spend more money than it earns until spring 2021.

Investor Outlook: Equities AMC Entertainment (AMC) dipped 13% on Tuesday, while Delta stock fell 2.7%.

Contested election could cost US its AAA credit rating

A messy election could hurt more than just faith in democracy – it could also cost the United States the perfect Fitch Ratings credit score, reports my CNN Business colleague Matt Egan.

Fitch wrote in a report this week that he will be watching the US presidential election closely for “any deviations” from America’s history of orderly transfers of power.

The United States has an impeccable AAA credit rating from Fitch in part because of its track record of strong governance, including “well understood rules and processes for the transfer of power,” the report says.

“Fitch would negatively see a departure from this principle when considering the US rating,” said the rating agency.

The big picture: The fact that Fitch had to issue such a warning highlights the growing political divide in the United States and Wall Street’s nervousness about the election. A contested election is the most frequently cited concern among portfolio managers surveyed by RBC Capital Markets, even surpassing concerns about the economy and the pandemic.

A downward revision could lead to an erosion of investor confidence, potentially causing turmoil in financial markets.

It could also make it more expensive for the United States to finance its mountain of debt. Given that US debt is now expected to exceed the total size of the economy for the first time since right after World War II, that would be a big problem.

following

Bank of America (BAC), Goldman Sachs (GS), Wells Fargo (WFC), PNC (PNC) and UnitedHealth (UNH) publish the results before the US markets open. Alcoa (AA) and United Airlines (UAL) follow after the close.

Also today: The U.S. Producer Price Index, a measure of inflation, displays at 8:30 a.m. ET.

Coming tomorrow: Morgan Stanley (SP) reports results as banking revenues continue.

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