What’s Behind a Red-Hot Quarter for Bank Earnings

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0:33Matt Grossman:Inflation cooled last month, offering some relief to Americans. But don't count on it to last. Plus, big banks raked in soaring profits last quarter. We're in a very healthy, active, exuberant market with very high prices and very high volumes. We benefit from that. We just don't know how long it will continue. And a T-Rex named Gus just became the world's most expensive dinosaur. It's Tuesday, July 14th. I'm Alex Osula for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. New data out today show that consumer prices were up 3.5 percent last month from a year earlier, beating analyst expectations and giving Americans a bit of a break on inflation.

1:20Matt Grossman:Prices rose somewhat more in May. They were up 4.2 percent that month. The news came as Fed Chairman Kevin Walsh testified before Congress today. telling lawmakers that the central bank won't tolerate high inflation. There might be some that look at this morning's data and say, oh, mission accomplished. Everything is swell. That is not my view. For more on what drove inflation lower and whether we can expect that to stick around, I'm joined now by WSJ economics reporter Matt Grossman. Matt, it seems like lower gas prices because of the de-escalation with the war in Iran are really the thing that led to these lower inflation numbers.

1:54Matt Grossman:Where else did consumers see that slower inflation play out? Prices across the board were pretty cool. In categories like car insurance, hotels, cell phone plans, consumers actually saw price decreases last month as well. And so overall, even if you exclude food and energy prices, inflation was basically zero month over month in June. Should we expect this cooler inflation to stick around? Oil prices have already risen a lot this week with the Iran war heating up again. Are there other forces that policymakers are watching that could push up prices? The news probably won't be this good throughout the rest of the year.

2:34Like you said, oil is already rebounding. We can't expect that airfares, grocery prices, car insurance, used cars, hotels, that those are going to keep getting cheaper month after month.

2:46Matt Grossman:That was WSJ economics reporter Matt Grossman. Thank you, Matt. Thank you.

2:54Matt Grossman:The Wall Street boom just keeps going, and it continues to lift profits for the country's biggest banks. You heard Jamie Dimon's note about the, quote, healthy, active market from J.P. Morgan's earnings call earlier in our show. Well, J.P. Morgan, Goldman Sachs, Bank of America, Citigroup, and Wells Fargo all reported second quarter results today. And as a group, their profits came to more than$49 billion. That's a 39 % jump from a year ago and beat analyst estimates. We had this really historic IPO being SpaceX, and that was great for these big banks. Specifically, Goldman, you saw revenue from its equity underwriting business more than double.

3:33And that was the bank that led this IPO. We saw a lot of volatility in the market because of the Iran conflict, which is good for traders. And then also M &A activity, we saw some records there. As far as volumes go, in the first half of the year, we saw the highest levels both in the U.S. and globally for M &A activity.

3:55Matt Grossman:That's banking reporter Gina Hebe. She says that the bank's results also suggest that consumers are doing well. There were some concerns that higher gas prices would pressure consumers, but they've been pretty resilient. We saw consumers continue to spend on cards, and we also saw delinquencies actually improve from a year ago at these big banks. And J.P. Morgan actually dismissed this idea of the K-shaped economy that a lot of executives have been talking about the past year plus. And this is the idea that the bottom half of the income spectrum has been doing a lot worse, or certain pockets of it have been.

4:33JPM actually said across income segments it saw continued spending, low loan delinquencies. So that was a very good sign. But the bank executives also talked about risks. All of them had this acknowledgement that the good times don't always last. And this was a very strong quarter, but we still have this conflict going on in the background. It's very uncertain. The Bank of America CEO noted that that could weigh on market perception, on IPOs. Jamie Dimon pointed to deficits and other risks in addition to inflation. And then, you know, you do have businesses and executives and clients who are still exercising some caution out there because of all of these uncertainties, despite these strong surface level numbers.

5:21Matt Grossman:An update on the war with Iran. The U.S. military says a naval blockade of Iranian ports is going back into effect today. But President Trump has abruptly reversed course on another part of his plans for the Strait of Hormuz. The president backed off charging a 20 percent fee on shipping cargo through the strait. He says that different countries called him to say that they would rather invest in the U.S. than pay shipping fees. You have Saudi Arabia, UAE, Qatar, Bahrain, and Kuwait. That was Trump at the White House during a meeting with the Iraqi prime minister today. Instead of the 20 percent fee, Trump says he'll do, quote, trade and investment deals with countries in the Gulf.

6:01They would love to invest more money in the United States at record amounts, and that would be very acceptable. And this way, there's no fee. I don't like the concept of a fee, but at the same time, it's not fair that we're protecting this straight for the entire world.

6:16Matt Grossman:It wasn't clear how the administration would have put shipping tolls in place, and some top U.S. officials have said in the past that they disagreed with a fee like that. U.S. indexes mostly rose today after the big bank's strong results kicked off earnings season. The Nasdaq led the gains and closed up 0.9 percent. The S &P also rose while the Dow was flat. But IBM sank 25 percent, its biggest decline on record, after a profit warning. And oil prices paired their gains after President Trump walked back the plan for a shipping fee on the Strait of Hormuz. Coming up, why Supreme Court justices testified in front of Congress for the first time in seven years.

6:53Matt Grossman:And ICE is suspending traffic stops. Those stories and more after the break.

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7:34Matt Grossman:Supreme Court Justices Elena Kagan and Amy Coney Barrett testified before Congress today. It's the first time the court has sent justices before lawmakers since 2019. So why are they on Capitol Hill? Congress is looking at the court's budget request. For the coming fiscal year, the court is asking for$228 million. That includes more than$14 million for increased security for the justices and their families. Barrett told Congress that after the court overturned Roe v. Wade, her security detail sent her home with a bulletproof vest. Maybe I lack imagination, but I didn't expect that performing this service was going to put me in the position of explaining to my children what a bulletproof vest was and why I had to wear one.

8:14Matt Grossman:The U.S. Marshals Service says that the number of threats against judges has risen drastically in recent years. Current and former ICE officials tell the Journal that the agency has suspended traffic stops. The decision comes a day after a federal immigration officer fatally shot a man in Maine. It was the second fatal shooting by an immigration officer in a week. Traffic stops are one of the most common ways that immigration officers have to arrest immigrants. If they're not using them, it would likely make it difficult for the administration to meet its internal arrest quotas. And billionaire Ken Griffin, the founder of investing giant Citadel, has poured roughly$40 million into helping Republicans win the midterms.

8:52Matt Grossman:And that number could easily double before November. He's particularly focused on Senate races. The journal understands that he thinks that's where his money can have the greatest long-term impact. Analysts say that Republicans have a better chance of keeping control of the Senate in the midterms, while the House is more up in the air. Griffin's single biggest gift this year was$10 million to the Senate Leadership Fund. That's a group aligned with Senate Majority Leader John Thune.

9:20Matt Grossman:If you're eating a salad right now, you may want to take a short breather. Health officials in Michigan are narrowing in on a culprit behind the foodborne illness that has sickened thousands across the U.S. They suspect that it's lettuce, with bagged pre-washed salad kits posing a particular risk. The FDA says lettuce is one of several produce items under investigation. The CDC says that so far, 34 states have reported cases of cyclosporiasis. It can cause explosive diarrhea and vomiting. More than 140 people have been hospitalized. Michigan has been hit hardest with more than 3 ,300 cases. But cases are also climbing in Ohio, Texas, and Illinois.

10:03Matt Grossman:And finally, sold. A 38-foot-long Tyrannosaurus Rex named Gus has sold for$50.1 million at Sotheby's. It's an auction record for a dinosaur skeleton. The buyer won a 10-minute bidding war and remains anonymous. The fossil market has been on the rise, but the U.S. is the only country where fossils taken from private land can be sold. And it's a whole matter of debate whether dinosaur skeletons should be privately owned at all. Many buyers do loan their dinosaurs to museums for the public to enjoy, like the previous dinosaur record holder, Apex the Stegosaurus. Ken Griffin, the Citadel founder we just told you about, spent$44.6 million on Apex in 2024, and that dinosaur is now on display at New York's Museum of Natural History.

10:48Matt Grossman:So what makes Gus a$50 million dinosaur? It's one of the largest T-Rexes ever discovered. Also, its percentage of completeness. No dinosaur is ever going to be 100 % complete because, you know, it is 67 million years old. So it's 61 % complete by bone count, 75 to 80 percent complete by bone mass, which is extraordinary, especially considering the size. That's what makes it so special. That's journal contributor Julie Davich. She says Gus got its name from where it was found. It was named for Gary Licking. Gus was his nickname. He owned the ranch in South Dakota where Gus the T-Rex was found and excavated.

11:30He sadly passed away about a year into the excavation process. And so they decided to name it after him and use his nickname. And it's actually Gus Rex.

11:41Matt Grossman:And that's what's news for this Tuesday afternoon. Today's show was produced by Danny Lewis and Anthony Bansy with supervising producer Tali Arbel. I'm Alex Osola for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.

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