Jamie Dimon's JPMorgan Kicks Off Bank Earnings July 14. Here's the One Number to Watch.

Bank earnings season has a traditional starting gun, and it goes off Tuesday, July 14, when JPMorgan Chase (NYSE: JPM) reports second-quarter results before the market opens. As the largest U.S. bank, sitting on trillions of dollars in deposits and loans, JPMorgan sets the tone for its own stock and for the sector behind it.

There will be plenty to sort through: trading revenue, investment-banking fees, loan losses, the size of the buyback. But one line matters more than the rest for where the stock goes next.

That line is net interest income.

Why net interest income is the number

Net interest income, or NII, is the gap between what a bank earns on its loans and securities and what it pays out on deposits. For a lender JPMorgan's size, it is the core profit engine, bigger and steadier than the trading desks that grab the headlines.

It is also the number that tripped up the stock last quarter. When JPMorgan reported first-quarter results in April, it trimmed its full-year 2026 NII guidance to about $103 billion. The quarter was otherwise strong, with net income of $16.5 billion, revenue up 10% year over year to $50.5 billion, and record trading revenue. But the softer NII outlook is what investors fixed on, and the stock pulled back.

The reason is the rate backdrop. As the Federal Reserve leans toward lower interest rates, banks earn less on new loans while still paying up for deposits. That squeezes the spread at the heart of NII. So when JPMorgan updates its guidance on July 14, the direction of that number -- raised, held, or cut again -- should tell investors a lot about how hard the rate environment is biting.

What the quarter needs to show

For the stock to keep working, JPMorgan needs NII to look like it is stabilizing, not sliding further.

The good news is that the bank enters the quarter from a position of strength. First-quarter profit was enormous, its trading business has been running hot, and management held the core, non-markets portion of its NII outlook steady at about $95 billion. If deposit costs are easing and loan demand is holding, NII can flatten out even with the Fed cutting.

The bank also keeps returning huge sums to shareholders. It pays a $6.00 annual dividend and buys back tens of billions of dollars of stock a year, a cushion that a smaller or weaker lender simply doesn't have.

The risk runs the other way. If management cuts the NII outlook again, it would likely signal that the rate squeeze is running deeper than expected. Because JPMorgan reports early in the bank earnings cycle, that worry tends to spread across every bank stock lined up behind it.

Valuation frames the stakes. JPMorgan trades at about 15 times expected earnings, near its highest levels ever after a strong run, and yields about 1.8%. That is not a demanding multiple for the best-run bank in the country. But it is no bargain either, and a stock near record highs has less room to shrug off a disappointment. None of that is a knock on the franchise. JPMorgan runs what Dimon likes to call a fortress balance sheet, and it has taken market share through every recent bout of turmoil.

So what should investors actually watch on July 14?

Not the headline earnings figure, which will be large and mostly anticipated. Watch the NII guidance, and watch what CEO Jamie Dimon says about the rate path and credit quality on the call. Dimon has spent recent quarters warning about an "increasingly complex" set of risks, from geopolitics to elevated asset prices, and his tone tends to color how the whole sector trades. A cautious word from Dimon can weigh on bank stocks even when the quarter's numbers look fine.

JPMorgan Chase is an advertising partner of Motley Fool Money. Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.