EmailPerhaps Friday the 13th can be the day the market snaps a six-session losing streak. The last day the S&P 500 posted a gain was July 3. Futures indicate an up open, but of only three points.
JP Morgan Chase reported operating earnings of $1.21 a share compared to an expected $0.70, and the stock is up $0.35 pre-market. The much-discussed trading loss by "the whale" is now at $4.4 billion for the second quarter and $5.8 billion total, which isn't quite as bad as feared. CEO Dimon stressed the company's strong financial position in the conference call. The underlying trends for the company are modestly bullish (retail is doing well, investment banking decent). Banks are, of course, considered at risk to European credit problems. Hence a restrained market response to a "not-bad" earnings report.
Well Fargo reported earnings of $0.82 a share. That was a penny ahead of the average Wall Street forecast. Revenue was slightly higher than expected. The mortgage business is strong. Wells is one of the healthier and safer banks. The stock, however, is down fractionally pre-market, reflecting the same underlying nervousness towards the financial sector seen in the reaction to the JP Morgan earnings report.
Despite the decent earnings reports from JP Morgan Chase and Wells Fargo, the early earnings trends have been disconcerting. There has been a far larger percentage of companies reporting profits and revenue below expectations than usually occurs. It is early, though, and next week will bring hundreds of reports.
China reported second quarter real GDP growth of 7.6% compared to the second quarter of 2011. That was the lowest growth rate since early 2009 but not quite as bad as feared. Global market reaction was muted.
Back in the US, Producer Prices (PPI) rose 0.1% in June. Core prices, excluding energy and food, rose 0.2%. Inflation is not a concern and there hasn't been (a bit surprisingly) much talk about deflation either. Fears of deflation as a result of weak global demand can rile the equity markets as much as inflation fears, and have arisen a number of times the past four years. PPI and CPI should post some declines in upcoming reports due to the recent declines in energy prices.
The markets aren't showing much friggatriskaidekaphobia (fear of Friday the 13th). At least not yet. The indicated up open is small and the markets often sell off on Friday on the risk of weekend news from Europe.
It still feels like summer.
Founder and Chairman, Briefing.com
