JP Morgan’s 2nd Quarter Earnings 2012 Upside Surprises, China GDP 7.6 Percent:
JP Morgan helped the financial sector rally today as the company came in with greater than expected second quarter profits. Aside from the London Whale’s erroneous somewhat – non hedging trades, JP Morgan beat earnings projections today that helped the overall market rally and it posted the biggest one day gain since March of this year. We believed an upward move was possible because volatility was at low levels and much of the bad news regarding the company’s earnings was already priced into the shares.
JP Morgan’s London Whale losses increased to $5.8 billion which was more than the first estimate of $2 billion the company released earlier. The company also needed to revise its first quarter profit by $459 million and posted a $4.96 billion second-quarter gain which is down from $5.43 billion a year ago.
The JP Morgan earnings news was an upside surprise to the banking sector and along with strong profits from Wells Fargo, the financial ETF soared right after the bell rang although JP Morgan’s shares rose in the pre-market trading session.
China GDP Hits Low at 7.6 Percent
China’s GDP came in at 7.6 percent a basis point above our projection of 7.5 percent. This suggests China’s growth is possibly much weaker and leaves room for easing. Added liquidity from China would be a boon to the global financial system and after two rate cuts in one month, we expect more. Global markets moved positively on the news as expectations of more – necessary, easing rose. The top world economies are growing at a much slower rate than anticipated early in the year.
We are watching the dollar, the financials, small caps and tech (namely semiconductors). We expected a bearish move to start the week and believed buying opportunities on dips would payoff if earnings news didn’t disappoint.