What's going on?

On Friday, three of the biggest US banks reported their financial performance for the past quarter. Citigroup, JPMorgan Chase and Wells Fargo posted better-than-expected results on Friday � and yet their stock prices slid. (tweet this)

What does this mean?

All three of these major banks beat investors� expectations on profits and other metrics. For instance, JPMorgan Chase clocked a whopping $7 billion in profit � its highest ever quarterly earnings.


In particular, investment banking (e.g. the departments that help with mergers and acquisitions) made gains thanks to buoyant market conditions (for example, more IPOs tend to take place when stocks are performing well). Meanwhile, trading took hard hits as a result of low market volatility (volatility can be good for traders who use price changes to swing profits).

Why should I care?

For markets: Some disappointing economic data hurt bank stocks on Friday.

Normally, when companies post high profits, their stock prices go up; yet all three of the banks saw their stock prices decline. One reason for discomfort may be some disappointing US economic data that was released on Friday. If economic growth is indeed weakening, the US Federal Reserve (�the Fed�) would be less likely to take action to increase interest rates. Banks benefit from higher interest rates because they can charge their customers more � and so their stock prices tend to fall when the opposite seems more likely.


The bigger picture: Political gridlock may be becoming an even bigger problem.

The CEO of JPMorgan Chase, Jamie Dimon, said on Friday that the political gridlock in Washington DC was so bad that he felt almost embarrassed being an American. Indeed, policy uncertainty is likely holding back businesses from making decisions � and spending money, which is a problem for the economy (it�s unclear how much of a problem, at the moment).