The financial sector led stocks down on Friday, as the previous day's rumors of better-than-expected Chinese GDP growth failed to pan out, and investors were unimpressed with the start of banks' earnings season.
NEW YORK ( TheStreet) -- Bank of America ( BAC) was the loser among the largest U.S. financial names on Wednesday, with shares declining more than 5% to close at $8.68. The broad indexes all pulled back over 1%, after China's first-quarter gross domestic product growth came in at an 8.1% annualized pace, slowing from 8.9% during the fourth quarter. A market rally during the previous session had in part reflected whispers that China's first-quarter gross domestic product report would show a surprisingly strong annualized growth rate of 9%.
The KBW Bank Index ( I:BKX) declined over 3% to close at 47.18. JPMorgan Chase ( JPM) and Wells Fargo ( WFC) led off earnings season for the largest U.S. banks, and the reaction wasn't pretty despite above-consensus profits from both companies. JPMorgan Chase JPMorgan's shares pulled back 4% on Friday to close at $43.21. The stock has now returned 31% year-to-date, following a 20% decline during 2011.
The shares currently trade at eight times the consensus 2013 EPS estimate of $5.54. JPMorgan reported first-quarter earnings on a managed basis of $5.38 billion, or $1.31 per share, soundly beating the consensus estimate of $1.18, among analysts polled by Thomson Reuters. The company saw a strong recovery in trading revenue, to $4.66 billion in the first quarter, compared to $2.49 billion during a very difficult fourth quarter. Trading revenue was still down 8% year-over-year. JPMorgan also reported very strong first-quarter mortgage revenue of $2.01 billion, up from $725 million in the fourth quarter and a loss of $487 million during the first quarter of 2011. All of the large banks are expected to report relatively strong first-quarter mortgage volume and revenue, in part from President Obama's expanded Home Affordable Refinance Program, which allows certain mortgage loan borrowers to refinance their homes at the current low rates, no matter how much the value of the home has declined. Interested in more on JPMorgan Chase? See TheStreet Ratings' report card for this stock.