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On Friday three big U.S. banks reported better-than-expected first-quarter earnings. But investors realized this wasn't an unambiguously good sign for markets.

What you need to know today

• JPMorgan Chase, Wells Fargo and Citi reported earnings Friday. All three big U.S. banks handily beat profit and revenue expectations. JPMorgan's numbers were the most impressive, with profit surging 52% in the first quarter.

• JPMorgan might have done spectacularly, but the U.S. economy is still on unstable footing, warned Jamie Dimon, the bank's CEO. "People need to be prepared for the potential of higher rates for longer," Dimon said, which might lead to "additional bank failures."

• In contrast to Dimon's prediction, U.S. Treasury Secretary Janet Yellen said the Federal Reserve might not need to raise interest rates further because of tighter lending by banks. However, rate cuts weren't mentioned, so high — though not higher — interest rates might indeed stay.

• U.S. markets fell Friday as weak retail sales overshadowed banks' stellar earnings. Asia-Pacific stocks were mixed Monday. China's Shanghai Composite rose 1.21% on the back of two pieces of good news: The country's economy is expected to expand 4% in the first quarter, and its home prices grew the fastest, month over month, in almost two years.

• PRO Markets this week will mostly be influenced by earnings reports, writes CNBC Pro's Scott Schnipper. One important tip: Investors shouldn't assume all better-than-expected numbers are good — because earnings forecasts have been negative for so long.

The bottom line

Investors weren't misled by big banks' bonanza of incredible earnings.

Yes, profit and revenue for all three banks that reported Friday rose compared with a year earlier. JPMorgan reported a record revenue of $39.34 billion, a 25% jump that beat analysts' estimate by more than $3 billion. Wells Fargo's revenue popped 17%, and Citi's rose 12%.

Investors rewarded the banks for their sterling balance sheets: JPMorgan soared 7.55% and Citi added 4.78% — though Wells Fargo dipped 0.05%, not because its numbers were bad but, I suspect, because it didn't beat Wall Street expectations as much as the other two banks.

Why were the figures so good? They had to thank rising interest rates, which allow banks to charge more for loans they make, while keeping the interest on saving accounts low. Banks pocket the difference, which is known as net interest income. It seems banks will continue benefiting from today's high interest-rate environment: JPMorgan predicted net interest income will be $7 billion more than the bank had previously forecast.

But high interest rates are a double-edged sword. Even though higher rates fueled big banks' earnings, they also expose weaknesses in balance sheets, as Dimon himself warned. This means that regional banks, lacking the financial heft of bigger ones to cushion possible losses — that's essentially how SVB failed — might not have such good news to share when they report earnings next week.

In other words, what's good for big banks' income is not necessarily good for the economy. Indeed, data released Friday showed the economy is slowing down. Retail sales in March declined 1%, two times more than economists had expected, according to an advanced reading. Citigroup CEO Jane Fraser said on an investor call that the bank saw a "notable softening" in consumer spending this year.

Despite the excitement over the big banks' earnings, then, investors kept a cool head, causing the three major indexes to fall. The S&P 500 lost 0.21%, the Dow Jones Industrial Index slid 0.42% and the Nasdaq Composite fell 0.35%.

Further earnings this week will give investors a clearer sense of markets.

Here are some key reports to look out for: Charles Schwab on Monday; Bank of America, Goldman Sachs and Netflix on Tuesday; Morgan Stanley, IBM and Tesla on Wednesday; American Express on Thursday; Procter & Gamble on Friday. By the end of this week, investors should know if the disconnect between a profitable corporate America and a flagging economy is limited to big banks — or if it's another side effect of the strange times we live in.

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