Financials Beat Estimates But China’s Growth Slows To 8.1 Percent:
Financial stocks took a short term turn after earnings announcements today from JP Morgan and Wells Fargo. Both companies beat estimates handily but traders and investors may be waiting for more data on earnings next week and war caught by surprise about China’s weakness.
U.S. markets reacted sharply to news about China’s economy slowing. China’s economic growth for the first quarter of 2012 slowed to 8.1 percent. Although some question the veracity of the numbers, the new economic data was well below the whisper number that circulated yesterday.
We have been neutral-negative on China and expected the country’s growth to slow down but have no general consensus on whether the Chinese economy will have a soft or hard landing. Data from China is hard to predict but globally there are some signs from Europe that world economy could be slowing down.
The slowing data from China along with lackluster initial jobless claims data and lower than expected numbers for March 2012 unemployment indicates some plausibility for quantitative easing. If the U.S. economy was adding 200,o00 + jobs in the past this would be less of a concern but the global growth story could be jeopardized by slow movement to curtail further weakness – before it becomes systematic.
At 3:23 the S&P 500 remained above 1,375 but was down in trading early today with the NASDAQ suffering steep losses due to Google and Apple. We are still watching financials closely which will need to participate in the next phase of the rally if the current minor correction is over. Homebuilders and upstream/downstream industries will also be important for gaging the direction of U.S. equities medium-run.