My oh my, what to expect this week? On the economic side, this week’s economic indicators include the Empire State and Philadelphia Federal Reserve’s manufacturing surveys, retail sales for March, housing starts, and existing home sales. That ought to provide enough anxiety in the market. Then again, we have about 86 companies in the S&P 500 expected let us know what’s up in the world of profits thus far. It should be interesting, since so far things have been shaping up well. Of the 32 companies in the S&P 500 that have already reported, some two dozen, or 75%, have beaten Wall Street expectations. Actually, this number is quite the norm, but that isn’t the point. The point is that, once again, the general prediction is that this would be a poor outing for corporate America. So far, again, corporate America has outsmarted the smarty pants who think they know.
Although corporate earnings are the ultimate arbiter in the market, economic news provides the catalyst for major moves, and, as I have been writing, China is doing its part to move the market, although the market is continually moving in the wrong direction from what is really going on out there in the land of spice and really good Chinese food. But before getting to that, let’s take a closer look at JP Morgan’s earnings. Maybe there is a nugget in there for us market watchers.
The bank’s business loan balances at the end of the first quarter were up 3 percent from the end of December and up 16 percent from a year earlier.
JP Morgan’s total revenue jumped 24 percent this past quarter. Mind you, the revenue came in on the banking side, not the trading side. This tells me the economic activity out there in business land is far from moribund, or even reversing. It appears there is an increasing demand for credit, which means active business out there. Things are still moving in the right direction, economically (financials and technology are still money makers). Now, to the big news …
The People’s Bank of China said it would allow the yuan to rise or fall 1 percent from a mid-point every day, effective Monday, compared with its previous 0.5 percent limit.
For many, this might not seem like news, but trust me, it is big. It is really big. It means China is not afraid of its slowing growth (remember, China has a plan). This currency move is bold in the face of declining GDP, as it makes their exported products more expensive, which points to that part of the plan which speaks to increasing imports and creating more domestic consumption. Yes, the plan seems to be working. Will the market see this and accept this? We will see …
On another topic of interest more specific to market watchers – the US car market. Once considered dead, oh, about three years ago, the industry has miraculously turned itself around. Where once not too long ago, it depended on light trucks, vans, and sport utility vehicles to make its numbers, it now depends more on what the Asian car makers have known for years – small is better. Not only have sales steadily risen from the ashes of decay, the mix of sales make US companies extremely competitive with Asian car makers. Today, small cars make up 40% of US carmakers’ total sales. Three years ago, the number was just 16%. That, my friends, is a turnaround, and it is something to keep a trading/investment eye on as the economy lumbers forward. Oh, and did I say it will lumber forward using less gas per mile driven?
Trade in the day – Invest in your life …
