The worry for the bulls was that with one or two big name earnings that were disappointing there could be a pretty large setback in the stock market. It didn’t take very long for that to happen. In fact it was this morning, on the first week of earning season. JP Morgan Chase reported earnings that beat analyst estimates, but the outlook for the bank and the industry as a whole didn’t exactly leave investors full of cheer.

The earnings beat was called one of “low-quality” by analyst David Trone. Fixed-income was worse than expected, revenue was on the light side, and probably most concerning of all there were no signs of traditional banking turning around in any major way. Jamie Dimon, CEO of JP Morgan, tried to hint at the fact business might get better in the second half of 2010, but he had no hard data or evidence that this will be the case. JP Morgan CFO Michael Cavanagh was asked about the banking business outlook for this year and he responded simply by saying two words “cautious outlook.” Cautious outlooks are completely understandable, but that certainly isn’t what the market or investors were hoping for from this banking bellwether.

Since JP Morgan has actually done better on the whole than most in the financial industry it is fair to say that expectations for earnings for the entire banking industry probably went down quite a bit on today’s news. Needless to say banking stocks are being hit pretty hard today, and it has definitely spread to the entire market, where the Dow is down by more than 100 points on the day.

Earnings season has a long way to go, but today is an example of the possible bumps in the road for the bulls as we continue to look for signs of a full economic recovery.

Today JP Morgan Chase reported earnings that were better than Wall Street analysts had expected. In the last week Wells Fargo projected record profits and stated that the mortgage market seemed to be turning around as they were seeing some notable increases in their mortgage business.

JP Morgan Chase saw its overall profit decline, but it was still much better than most were expecting. The main reason the company was able to beat expectations so soundly was the securities business. The investment banking business at JP Morgan Chase had its best quarter ever. CEO Jamie Dimon said he doesn’t believe the tremendous gains in the investment banking are sustainable and that it would be unreasonable to expect continued results like that from that particular business. JP Morgan Chase was slightly less open about the direction they believe the industry and specifically the mortgage sector is heading. It should be noted though that Wells Fargo has a bigger mortgage business on the whole, so they would likely have more to say about that business when they report earnings on April 22.

The question now becomes, are these two companies aberrations or are they going to be commonplace when it comes to earnings from financial companies? I tend to think that these companies are more of an aberration than a rule. Both of these companies have proven to be ahead of the pack in recent quarters when it comes to writing down their losses and being innovative about getting back on track quicker than the industry as a whole. It is quite likely that these two are taking business away from their competitors, which could be part of the reason they are beating expectations.

The bottom line is these two earnings reports have been positive for the overall market and the economy, but it is far too early to think that banks and the rest of the financials are going to be just fine. These two companies may well be ahead of the rest of the pack, but only time will tell.