The S&P 500 index has been in a consolidation phase for the past few weeks. The market is now at a level where buyers should start coming back in. However, the news from JP Morgan last night may spook the market and bring back worries about bank solvency.
“There were many errors, sloppiness and bad judgment,” JP Morgan CEO Jamie Dimon said. “These were grievous mistakes, they were self-inflicted.”
Trading at current levels will give us a good indication of how investors are reacting to JP Morgan’s news of a $2 billion trading loss. Investors may view this as a one time event – or they may view it as yet another issue that is still facing US banks: managing risk.
The big issue that could impact the stock market is if these “too big to fail” banks need to be broken up and what the resulting effect on the stock market, liquidity, and the economy will be.