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JPMorgan Sets High Bar on Trading

JPMorgan Chase posted strong trading results Wednesday, fueling bullishness about other trading-oriented firms, but investors buying up shares of those firms may be disappointed.
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) -- Strong trading results from

JPMorgan Chase

(JPM) - Get JPMorgan Chase & Co. Report

earlier this week is fueling bullishness for other trading-oriented firms including

Goldman Sachs

(GS) - Get Goldman Sachs Group, Inc. Report


Morgan Stanley

(MS) - Get Morgan Stanley Report


Jefferies Group

, but investors buying up shares of those firms may be disappointed.

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JPMorgan reported revenues of $5.46 billion in a division it calls "fixed income markets," which includes commodities and foreign exchange trading. That is more than in any single quarter of last year, when the bank turned in record-shattering fixed income revenues of $17.56 billion. For perspective, JPMorgan turned in fixed income revenues of $1.96 billion in 2008, $6.34 billion in 2007 and $8.74 billion in 2006.

Morgan Stanley, Goldman and Jefferies all jumped after the numbers came out Wednesday morning, and have generally hung onto those gains. As of Thursday's close, Goldman, which reports its first-quarter results next Tuesday, is up 2.8%; Morgan Stanley, which reports Wednesday, is up 1.3%; and Jefferies, which announces numbers Thursday, is up 3.1%.

Good trading results at JPMorgan certainly bodes well for these rivals, so there is some reason for bullishness. Nonetheless, fixed income currencies and commodities trading (FICC) as some firms like to call it, more than perhaps any other number, is vulnerable to big discrepancies from one firm to another.

Trading in FICC is almost always the largest contributor to earnings, not just for JPMorgan, but for other large banks like Goldman, Morgan Stanley,


(C) - Get Citigroup Inc. Report


Bank of America

(BAC) - Get Bank of America Corp Report


Companies should not report fixed income, currencies and commodities trading in a single revenue line, but they all get away with it. There are so many different kinds of trades encompassed in the one number, spanning such a large time period, that investors who cannot get "color" (a.k.a. material non-public information) from inside the firm have no idea what is going on there.

In short, keep a close eye on Morgan Stanley, Goldman, Jefferies and Citigroup as their reporting dates approach. Some optimism is warranted based on JPMorgan's trading results, but not too much.


Written by Dan Freed in New York