A dealmaking freeze and the biggest rout in financial stocks since 2023 are raising the stakes for the start of Wall Street’s earnings season this coming week.
The big banks that are due to report their first quarter results starting this Friday all tumbled following the release of President Trump’s sweeping new tariffs, including JPMorgan Chase (JPM), Wells Fargo (WFC), Citigroup (C), Goldman Sachs (GS), Morgan Stanley (MS), and Bank of America (BAC). Those lenders fell between 13% and 18% on the week.
An index tracking the larger US banking industry (^BKX) also plunged 15.5% Thursday and Friday, its worst two-day performance since March 2020. Its weekly pullback of roughly 14% was the biggest drop since a regional banking crisis roiled the industry in March 2023.
The industrywide stock rout became the latest example of how Trump’s second term is not starting the way many on Wall Street expected.
Hopes for an IPO bonanza and M&A boom are being put to the test due to uncertainties surrounding the Trump administration’s trade policies and the market reaction to them.
Amid the turmoil of this past week, StubHub and Klarna (KLAR.PVT) decided to postpone their IPO roadshows, while another fintech company called Chime (CHIM.PVT) delayed its plans to go public, according to the Wall Street Journal.
Trading platform eToro Group Ltd. (ETTO.PVT) also paused its planned listing, along with MNTN Inc. and insurer Ategrity Specialty Holdings, according to Bloomberg. Some M&A deals are also on hold, according to Bloomberg.
Executives at JPMorgan, Goldman, and Bank of America, as a result, are already considering revising down revenue for their M&A advisory businesses, according to Bloomberg.
Big banks will be tested in other ways if market watchers are right about the increased odds of a US recession and rising inflation, since both will create new challenges for the lenders and their customers.
The fact that long-term borrowing rates have dropped in reaction to Trump’s trade policies is another problem for banks, in that it makes it harder for them to book big profits on their loans.
Even without a recession, analysts expect bank executives to dial back their annual guidance for loan growth.
There are some positive signs for banks, however, even if they take longer to materialize.
The Trump administration has made it clear it wants to lift constraints on lenders and overhaul a regulatory framework put in place following the 2008 financial crisis. That could help with bank profitability.
The current trading volatility could also help the trading desks of the Wall Street giants.
