Deutsche Bank upgrades JPMorgan Chase (JPM) to "Buy" and downgrades Wells Fargo (WFC) to "Hold" ahead of fourth-quarter and full year results. JPMorgan, Wells Fargo, Bank of America, Citi, and BlackRock are all set to report on Friday morning.

Yahoo Finance anchors Brad Smith and Seana Smith preview the results as investors look for updates on consumer spending amid a higher rate environment.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Luke Carberry Mogan.

Video Transcript

BRAD SMITH: Deutsche Bank upgrading its rating on JPMorgan Chase while downgrading Wells Fargo as the banks gear up to report their quarterly results on Friday. There, you're taking a look at some of the activity here today. Of course, this really sets the tone for earnings season.

You hear about the consumer. You hear about the economy. You also hear for the banks how they're moderating their own head count as well. And so all of this considered, with some of the products that each of them, of course, specialize in, most notably where the consumer balances-- and for the banks that also deal heavily with small businesses-- what those balances look like, we get kind of an insight into what the health of the economy is through some of those standards as well.

SEANA SMITH: Certainly, there's a long list of reasons of why, obviously, investors and shareholders-- everyone pays very close attention to the earnings that we're getting out from some of the big banks. But I also want to put it in perspective for the viewers here just in terms of how much is riding on these results.

We've talked to a number of strategists over the last several weeks saying, yes, we are seeing weakness here, at least since the start of the year within the market. A lot of that being profit taking following the massive rally that we saw at the end of 2023. But looking ahead to 2024, earnings could really be the catalyst here for the next leg higher.

So if we do see a strong start to earnings season from a group of these financial stocks, that could really set the tone here for 2024, at least in the first quarter. And looking ahead to some of the things that we're going to be keeping a very close eye on within these reports, decline expected in net interest income. JPMorgan warning of that.

The outlook there for the entire banking sector, also tepid loan growth, and mixed capital market trends. That could have an impact here on the investment banking revenues. A trend that we have seen now for quite some time as a lot of companies stay on the sidelines, a lot of activity being held off until we get some more clarity from the Fed, until we get policy that's a little bit more accommodative.

BRAD SMITH: Absolutely. We're going to be watching that closely. We'll bring it to your attention at the latter half of this week.