What earnings from the largest U.S. Bank is telling investors…

JPMorgan (NYSE:JPM) reported earnings yesterday that came in worse-than-expected, sending its stock down 3%.

What’s the big deal? JPMorgan is the largest U.S. bank and its earnings are often used to gauge the economy’s health. The forecast is looking gloomy, and here’s what their CEO Jamie Dimon is saying:

• Inflation will go up more than expected and previously said an “economic hurricane” was coming.
• In a more optimistic view, he sees consumers being “in good shape” — who are still spending and paying their bills on time.

Onto the numbers: The lack of IPOs and deal activity is hurting the banking sector — leading to a 54% drop in JPMorgan’s investment banking fees.

• Revenue came in at $31.6B — just missing the $31.95B expected.
• Net income fell 28% — lower than expected.

Rising interest rates helped send JPMorgan’s net interest income up 19% — higher than expected. But last month’s stress test on banks took a toll on JPMorgan:

• JPMorgan, Bank of America and Citigroup were required to hold more liquid assets like cash as a portion of their balance sheet.
• After the test, other banks increased dividend payouts while JPMorgan and Citigroup kept it the same.

JPMorgan will “temporarily” suspend stock buybacks — a form of returning value to shareholders. Dimon is trying to remain optimistic, but he’s not taking any chances — hunkering down for a recession.