Between U.S. & Chinese Fortunes - Analyst Blog


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Today's trading action will reflect the interplay between relatively positive data on the home front and less-than-robust economic growth read from China. On the home front, we have a benign and QE friendly inflation reading and a solid start to bank earnings from JPMorgan ( JPM ). The first quarter GDP read from China is by no means worrisome, but nevertheless fell short of expectations.

The Chinese economy grew at a slower-than-expected 8.1% pace in the first quarter compared to the year-earlier quarter, down from the fourth quarter 2011 growth rate of 8.9%. The growth rate looks less flattering on a quarter-over-quarter basis, up 7.4%, compared to the fourth quarter's 7.8% pace and below the government's 7.5% target. Thursday's rumors of a 9% GDP print appear to have been just that.

The economy's growth pace is mildly disappointing, though no one will consider it as evidence of a hard landing for the Chinese economy. But the market will likely give back some of its Thursday gains that were inspired by the 9% GDP growth rumor.

The Consumer Price Index ( CPI ) for March came broadly in-line with market expectations, up 0.3% on the 'headline' after February's 0.4% increase. 'Core' CPI, which strips out food and energy, also matched expectations, up 0.1% after February's 0.1% increase. The year-over-year readings were broadly in-line with expectations as well. The increase in the 'headline' reading from last month reflects mostly gasoline strength, but the benign 'core' reading will keep hopes of further Fed support alive should fundamental growth readings continue to disappoint.

On the earnings front, JPMorgan not only came out with better-than-expected earnings and revenue numbers this morning, but also announced dividend hike and a share buyback program. We also got a positive surprise and dividend hike from from Wells Fargo ( WFC ) this morning. The positive banking results will likely raise hopes for a broader rebound in the thus-far-subdued broader banking sector.

In other earnings news, Google's ( GOOG ) results after the close on Thursday came ahead of expectations, though a key metric tied to the value of its online ads (cost per click) continued to show weakness. The lower value of online ads on mobile platforms is behind this trend, though the company has been able to offset the downtrend on this front through increased ad volume.

Google also announced a non-voting stock dividend through a 2-for-1 stock split that helps it preserve its cash holding and the founders' voting control of the company. It will be interesting to see if this non-voting stock gift will help improve investors' enthusiasm for Google's shares. The stock has not been a participant in the stock market rally over the last six months.

GOOGLE INC-CL A ( GOOG ): Free Stock Analysis Report
JPMORGAN CHASE ( JPM ): Free Stock Analysis Report
WELLS FARGO-NEW ( WFC ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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