China is slowing while inflation seems to be sleeping. Most bank stocks are losing value and Google is headed for a split. That’s just some of the bad news in the market on Friday, the 13th of April. Stocks were higher on Thursday but Friday they moved lower. Is there something to the saying that Friday the 13this unlucky? When the numbers were delivered on China today, many thought so.
We learned that the gross domestic product of China‘ grew at an 8.1% annualized pace in the first quarter. Obviously, that’s a good level of growth, but down from the 8.9% pace of last year’s fourth quarter. ”And it’s disappointing, considering that Thursday’s market rally was partly due to whispers that China‘s growth may not slow after all.” Yet, China’s GDP number does not have to be a cause for alarm. However, it will not silence the throng of China critics who think that China’s economy is destining to fall even lower.
“The slow down may also put more pressure on China’s central bank to lower its reserve requirement ratio for banks again — or even cut interest rates. “It is important for global sentiment that China‘s growth remains strong,” said John Derrick, director of research for U.S. Global Investors. “If China were to be more aggressive with easing, that would be good for stocks.”
“Speaking of interest rates, the Federal Reserve has more justification to leave rates near zero for a while thanks to the March consumer price report. Consumer prices rose 2.7% year-over-year through March, down from a 2.9% pace a month earlier.”
“The Fed can continue to keep monetary policy loose as long as inflation remains low. But while the latest round of job market data — a pullback in hiring in March and a pickup in weekly unemployment claims — is disheartening, those numbers are probably not weak enough to give the Fed good reason for further bond buying.”
“What’s more, even though inflation is low, the price of consumer goods is still rising at a higher clip than wages. So the Fed can’t completely write off concerns about inflation just yet. The market seems to sense that, and that may be another reason why stocks are down Friday.
“The Fed can keep current policy in place, but there is nothing hinting at deflation. So there is no ammunition for more easing right now,” Derrick said.
“Finally, there are earnings. Profits at JPMorgan Chase (JPM, Fortune 500) and Wells Fargo (WFC, Fortune 500) did both top estimates. That’s the good news. But both stocks were lower Friday, as were shares of Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500), which are each set to report results next week.”…