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| Subject: China's economic growth failed=falling 102 points, | |
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Author: Blask Friday |
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Date Posted: 09:02:09 04/13/12 Fri NEW YORK (TheStreet) -- Stocks tumbled Friday after a report of China's economic growth failed to live up to elevated expectations. More on Stock Market Stock Futures Decline Despite Strong JPMorgan, Wells Fargo ReportsStocks Soar, Finish Near Session-HighsStock Futures Cling to GainsMarket Activity JPMorgan Chase & Co| JPM Dow Jones Industrial Average| ^DJI S&P 500 Index| ^GSPC The disappointment over China overshadowed solid earnings reports from financial bellwethers JPMorgan Chase and Wells Fargo(WFC_). Instead of a whispered-about upside surprise, China reported its slowest quarterly pace of economic growth in three years. Also, the latest U.S. inflation numbers were slightly higher but still in line with expectations. In addition, Europe was on track for a weak close, further damaging sentiment on Wall Street as data showed Spanish banks are relying heavily on funding from the European Central Bank. At last check, the Dow Jones Industrial Average was falling 102 points, or 0.8%, at 12,885. The S&P 500 was down 13 points, or 0.9%, at 1375, led lower by banking sector losses after their strong run through the first quarter and intraday weakness in Spanish banks such as Banco Santander(STD_), down 4%. Energy and materials were also among the biggest losers. The Nasdaq was falling 37 points, or 1.2%, at 3019, as heavyweight Apple (AAPL_) lost more than 2%. Stocks soared Thursday as optimism about China and stimulus-friendly commentary from Federal Reserve officials revived the risk-on trade. Factor in Wednesday's move higher, and it was the Dow's best two-day performance on both a point and percentage basis since Dec. 21. China's first-quarter gross domestic product slowed to 8.1% from 8.9% in the prior quarter. That was a big miss on the 9% figure traders were passing around Thursday and put a damper on hopes that the report would offset concerns over signs of a slowing U.S. economic recovery and the stresses in Europe. The slowdown was attributed to weakness in export growth and the construction sector, while investment and domestic consumption supported growth. "For the bulls, the trifecta of slower growth in China, moderating inflation in the U.S., and moderately strong earnings only means one thing: further monetary easing remains a very real possibility in the face of deflationary pressure," says Michael Gayed, chief investment strategist, Pension Partners, in an email. "Moderating inflation confirms the Fed's view that it can keep rates low for a while (bullish), slower than estimated growth in China means the People's Bank of China could begin to ease rates and jumpstart lending in response (bullish), and earnings surprising modestly on the upside means that there is a lot of room for expectations to continue to build for further stimulus (bullish). While QE3 remains a question mark, China's monetary stance may now be more important for the bulls than the Fed's." "[The worse than expected China report] was allayed a bit by the trade numbers for the U.S. that showed exports growing fairly strong, surprisingly -- a narrowing trade deficit, and that can only happen if growth in the rest of the world is actually not as bad as one might think," adds Brian Gendreau, market strategist, Cetera Financial Group. Commodities were sliding and the 10-year Treasury was climbing after the report. May oil futures were down 62 cents to $103.02 a barrel, while June gold futures were losing $10.10 at $1,670.50 an ounce. The benchmark 10-year Treasury was up 18/32, diluting the yield to 1.99%, while the U.S. dollar index advanced 0.7%. North Korea's launch of a long-range rocket was adding to the edginess of the markets. The rocket exploded as it took off and failed to deliver a satellite into orbit. London's FTSE was falling 1% and Germany's DAX was giving up 2.4%. In Asia, however, Japan's Nikkei Average settled 1.2% higher and Hong Kong's Hang Seng index closed up 1.8% despite the disappointing China GDP data, with those markets focusing instead on the country's surging bank lending figures and the increasing possibility of monetary policy easing. 2012 Stock Predictions and Outlook Your one-stop shop for 2012 stock recommendations and market predictions. In U.S. economic news on Friday, the University of Michigan's gauge of consumer sentiment for April showed a slight decline month on month to a preliminary reading of 75.7 from a final reading of 76.2 in March. Economists in a Thomson Reuters survey expected a repeat of the final March reading. The Labor Department said today that the consumer price index for March rose 0.3%, compared with a gain of 0.4% in February. Gasoline prices were the biggest gainer and main reason behind the 0.3% increase. Stripping out the volatile food and energy components, the core figure rose 0.2% for March, compared with an increase of 0.1% in February. Both the core and headline data matched expectations exactly. In corporate news, JPMorgan said strong investment banking results and an improvement in mortgage banking revenues powered profits in the first quarter. The nation's largest bank by assets and deposits reported net income on a managed basis of $5.38 billion or $1.31 per share, down slightly from $5.55 billion or $1.29 per share in the year-ago quarter. In the fourth quarter, the bank posted a net income of $3.7 billion or 90 cents per share. Profits included several one-off items including a $1.8 billion pretax benefit from reduced loan-loss reserves, a $1.1 billion pretax benefit from WaMu's bankruptcy settlement, which was offset by a $2.5 billion pretax expense for additional litigation reserves and a debt valuation adjustment loss of $0.9 billion- an accounting loss incurred from tightening spreads on the bank's own debt. Excluding items, "core" earnings per share was $1.39 per share. Revenue came in at $27.4 billion, up 6% from the year-ago quarter and 24% over previous quarter. Analysts were expecting an earnings per share of $1.18 on revenues of $24.68 billion. The stock was down 0.7% at $44.51. Wells Fargo (WFC) on Friday reported a 21% quarter-over-quarter increase in mortgage banking revenue, pushing profits to record levels. The company earned $4.2 billion, or a record 75 cents a share during the first quarter, compared to fourth-quarter earnings of $4.1 billion, or 73 cents a share, and earnings of $3.8 billion, or 67 cents a share, during the first quarter of 2011. The first-quarter results beat the 73-cent consensus estimate, among analysts polled by Thomson Reuters. First quarter revenue totaled $21.6 billion, beating the consensus estimate of $20.51 billion, mainly reflecting the strong mortgage origination volume. In comparison, Wells Fargo reported total revenue of $20.6 billion during the fourth quarter, and $20.3 billion, during the first quarter of 2011. Shares of Wells Fargo were sliding 1.9% at $33.38. "Even though at first glance, JPMorgan and Wells Fargo basically had good numbers -- as did Google -- once you kind of start probing deeper you find some bits for concern," said Doug Roberts, chief investment strategist, ChannelCapitalResearch.com, who cited the oversize impact of a few individual traders on JPMorgan's bottom line and that the bank is "taking a higher risk profile than previously." Google(GOOG_), the Internet search giant, posted strong quarterly earnings and announced a two-for-one stock split after Thursday's closing bell. The stock wasn't getting a benefit from the performance though, losing more than 3%, and average cost-per-click fell on both a year-over-year and sequential basis. -- Written by Andrea Tse in New York. [ Next Thread | Previous Thread | Next Message | Previous Message ] |