Trader Talk

Pisani: China is Bleeding US Markets Today

If you're wondering about why the markets are weak today, the primary catalyst is China. Like it or not, China is the big kahuna in terms of economic growth.

Chinese authorities are taking aggressive steps to curb bank lending. These include higher reserve requirements for banks, but there are also reports they are taking steps to implement lending quotas and that some banks have been told to stop lending in January.

The purpose: to control inflation and reign in the bubble that has developed in real estate and, to a lesser extent, commodities.

How hot is China's real estate market? It's slowing but still hot. UBS says that property sales rose by 43 percent year over year in December, but it was up 100 percent in November! Housing starts rose by 34 percent year over year in December, down from 194 percent in November.

The upshot: the dollar has rallied and global growth stocks (materials, industrials, and energy) are under pressure today: materials down 2.0 percent, industrials and energy down 1.8 percent.

Another factor: seasonal weakness. Tom McClellan and others have noted that the market usually rises in the first part of January, but then usuall weakens by the third weak before trending upward again.


The "worst mutual fund ever" shuts down. The 87 remaining investors in the Frontier Microcap, which invests in microcap stocks, are finally liquidating the fund. $1,000 invested ten years ago in the fund would be worth $11.35 today. And the fees were huge!

Don't cry too much, though—the fund has gone from $1.6 million in assets to $53,157.

CNBC's Companies in the News:


Berkshire Hathaway

Wells Fargo

Bank of America

Morgan Stanley

CNBC Data Pages:



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