What's going on?

A legend-worthy huddle of big banks reported earnings on Friday, and their results sent an initial shiver down investors� spines.

What does this mean?

When Citigroup, JPMorgan (JPM), Wells Fargo, and Bank of America released their results on Friday, their profit stats seemed to buck the bad-luck trend of Friday the 13th. But dig into the guts of the reports, and you�ll find there�s more to the tale: the banks poured more cash into their �just in case� reserves than expected, and the fees they made from investment banking dropped off too. Overall, they seemed wary of the real possibility of a deteriorating economy, with JPM�s CEO cautioning that we still don�t know the �ultimate effect of the headwinds coming�. Investors heeded the warning, and left bank stocks and US indexes to retreat in their wake.

Why should I care?

For the economy: Big banks, big warnings.
Even if you don�t care for fat cat news, it�s still worth keeping an eye on big banks: their earnings often indicate how the economy�s doing as a whole, and can even offer hints about the future. See, banks make money from a whole range of businesses and individual folk, so they tend to notice changes in sectors early on. So if banks� voices wavered when they delivered their latest insights, you can understand why investors might�ve got trembling hands.

For markets: Watch out for the rally killer.
Those big bank results could set the scene for the rest of earnings season � so it�s not ideal that the tone is a far cry from �fairytale� right now. Stocks, after all, have had a sudden pep in their step, mainly thanks to falling inflation and an unexpectedly strong economic response to rising rates. But if earnings end up haunting markets, that rally could soon be scared away.