Greece has been dominating the headlines lately, but the news
out of China in the last few days has not been that reassuring
either. But just as weak U.S. economic reports are perceived as
improving the odds of further Fed support, the soft Chinese data
also gets interpreted from that angle. And while one could question
the Fed's capacity to have a meaningful impact on the economy given
the existing monetary stance, few doubt the ability and capacity of
Chinese authorities ease conditions.
The headlines today will likely be dominated by the trading
missteps by
J.P. Morgan
(
JPM
), the entity with the golden touch that could do no wrong, but the
European and Chinese concerns will not be far from investors'
minds. The J.P. Morgan story is significant not so much because of
because of the amount of losses involved, but because it serves as
another reminder of how big, complicated, and opaque these banking
entities have become.
If Jamie Dimon, who came out of the banking crisis with his and
his firm's stature enhanced, could not prevent such derivatives
linked loss, then these banks are not only too-big-to-fail, but
also likely too-big-to-manage. Given this, investors should perhaps
not give JPM a pass and are fully justified in staying away from
Citigroup
(
C
) and
Bank of America
(
BAC
). Jamie Dimon has been in the forefront of opposition to the new
regulatory framework put together under the post-crisis Dodd-Frank
legislation. It is unclear if implementation of the Volcker Rule
would have prevented the JPM loss, but this episode does highlight
the need for greater oversight over the banks' proprietary trading
and risk management practices.
J.P. Morgan, China, and Greece aside, we got a broadly in-line
April Producer Price Index (PPI) report this morning, with the
'headline' at down 0.2% vs. 'unchanged' in March and expectations
of an 'unchanged' reading. The 'core' reading, which strips out the
food and energy components, was also in-line with expectations at
up 0.2% vs. up 0.3% in March.
We will get the April CPI report on Tuesday next week, but this
PPI reading is not showing any signs of pricing pressures in the
pipeline. In other economic news on tap, the May University of
Michigan Consumer Sentiment survey coming out a little later is
expected to have modestly slipped from the April level. But I will
be surprised if any of these two reports will have any impact in
today's trading action.
BANK OF AMER CP (BAC): Free Stock Analysis
Report
CITIGROUP INC (C): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis
Report
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