Data about a bigger-than-expected rise in Chinese inflation, a
wider-than-expected trade deficit in the U.S. and a positive
start to big-bank earnings provide the backdrop for today's
trading action. The Chinese inflation picture may not actually be
that worrisome, but the domestic trade deficit numbers could be
problematic for GDP growth estimates in the fourth quarter.
Overall though, stocks may not do much today after reaching
5-year highs on Thursday, particularly with the fourth quarter
reporting getting into high gear next week.??????
The rise in China's December CPI at a bigger-than-expected
2.5% pace could potentially limit the monetary authorities'
flexibility. But the rise may not be worrisome enough at this
stage -- it remains below their target and pressures at the
wholesale level appear contained.
Chinese authorities lowered interest rates twice in 2012 and
have largely relied on bank reserve requirements as a choice
monetary policy tool. But it hasn't lowered reserve requirements
since May last year either despite widespread clamor in the
market for such action.
A key concern for China remains pricing trends in the property
markets. The December survey shows that average home prices in
China's 10 biggest cities increased for the second time in 2012.
Overall, one could reasonably infer from today's inflation data
that China could afford to keep current policy in place without
stoking inflation fears. ??????
) earnings beat this morning kick-starts earnings results for the
big banks. Wells Fargo along with other major banks like
Bank of America
) and others were in the news this week with respect to the $8.5
billion settlement about foreclosure issues.
Wells Fargo has been a standout performer in the group, with a
track record of consistent profitability quarter after quarter.
The bank's large mortgage business has helped it offset the other
difficult operating environment of compressed net interest
margins and weak loan demand. Notwithstanding the earnings and
revenue beat and a decent loan growth, Wells Fargo's net interest
margin was lower than in the previous quarter, which some may
find as problematic.
Overall, the banking sector is expected to be once again one
of the strongest earnings performers this quarter, though
estimates have been coming down since the announcement of the
foreclosure settlement earlier this week. Excluding earnings from
the Finance sector, total fourth quarter earnings for companies
in the S&P 500 fall into negative territory.
BANK OF AMER CP (BAC): Free Stock Analysis
CITIGROUP INC (C): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis
WELLS FARGO-NEW (WFC): Free Stock Analysis
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