NEW YORK (MarketWatch) -- J.P. Morgan President Jamie Dimon said Wednesday that the bank's trading profit for the second quarter would be its worst in recent memory, and his cautious tone sapped gains from shares of J.P. Morgan and its peers. NEWS FOR JPM J.P. Morgan cautions on proprietary-trading results ISM data, bonds help financials rise Credit card too conservative? You can get the red out More news for JPM "Absent any improvements in June, we expect our trading results to be worse this quarter than they were in the third quarter last year, which was a terrible quarter," Dimon said during an investor presentation in New York. In the third quarter of 2004, the bank reported trading earnings of $842 million. Dimon said profit would be weakest from trades that put the firm's own capital at risk. Capital-markets 'problem' "There is a problem in the capital-markets business this quarter," Punk Zeigel analyst Dick Bove said Wednesday. "Dimon's take on it is that it's not a risk problem, but that the yield curve has flattened, the oil price has moved. "When you have so many changes, you will see dislocation in the markets." Several analysts have recently lowered earnings estimates for top investment banks, cautioning that the trading environment had grown weaker. Proprietary trading, or the market bets a bank makes with its own money, are notoriously hard to predict. Often when the markets move as much as they have in the past months, one or more of the bigger firms on Wall Street will take a hit from being on the wrong side of a trade. Real-estate issues Concern over the housing market and mortgage lending also turned up in Dimon's comments. "I think it is a very legitimate concern that someone may get hurt in the mortgage business. Those who extended credit don't have good systems. ... If you're extending [interest-only loans] and appraisals, and lower subprime, and you have negative amortization, I think someone's going to get hurt," Dimon said. Dimon cautioned as well about the risk inherent in novel financial products and the pitfalls that can emerge as market participants while adjusting to them. "If you look at the history of financial markets ... almost every new financial product you can go back to... someone got hurt as people are learning how to manage through the real risk inherent in those products. I think you may see a little bit of that; it will be more in the new products than the old ones," Dimon said. Punk Zeigel's Bove said those comments also probably weakened shares of the big mortgage trader Bear Stearns and Cos., whose stock (BSC: news, chart, profile) fell 12 cents to $98.92 after rising earlier in the session. J.P. Morgan Chase shares (JPM: news, chart, profile) ended the day up a penny at $35.76, well off their high for the day. "Dimon is saying that earnings are not going to be robust," according to Bove, "and you are going to have to wait until I [Dimon] fix this machine."