Now that we are starting to get into the heart of earnings season, the news is looking a little better (thank heavens!). Intel is a big help, but the financials are the key here. After what happened with GE and Wachovia, the Street was primed for all sorts of bad news, which--at least today--has NOT materialized:
--JP Morgantalked about "solid business momentum and our capital position remained strong" but was cautious on the economy. Up 2 percent pre-open. I'm not trying to gild the lilly here; earnings were down about 50 percent, but it was not worse than expected.
--Wells Fargotalked about "balance sheet strengthening", acknowledged that losses from home equity loans had increased. Up 8 percent pre-open.
--Washington Mutual reported a loss of $1.40; not good, but it was in line with guidance they had provided.
1) What global slowdown? Chinese GDP up 10.6 percent, slightly higher than expected. They raised reserve requirements.
2) It hurts, but it's good news: March housing starts weaker than expected, the lowest since early 1991; more importantly permits were below consensus at 927 thousand, also the lowest since 1991. This is bad for GDP but good for getting the inventory levels down. CPI in line with expectations, but still elevated.
3) Commodity inflation is a big problem. Potash up 4 percent pre-open; they just announced an agreement with a Chinese fertilizer to supply potash at prices $400 per ton higher than in 2007. In other words, potash (and fertilizer) prices just keep going up.
Speaking of commodity inflation: copper up 3 percent, near a new high.
4) JC Penney's CEO, Myron Ullman, said that he did not have enough visibility to provide guidance. He spoke at an analyst meeting. Down 1 percent pre-open.
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