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Hold still. The three major US stock indexes all posted marginal gains on Monday. Two had set new records last week, with the S & P 500 exceeding 3,000 and the Dow Jones Industrial Average exceeding 27,000. The Chinese economy had the slowest growth in 27 years in the second quarter. Treasury Secretary Steven Mnuchin expressed "serious concerns" about
Facebook
(Currency: FB) Balance digital currency at a Monday press conference. The second quarter earnings season is underway and
Citigroup
(C) reported profits above expectations. Today After the bell, we …
- check how the Chinese economy has experienced the second quarter;
- review Citigroup's share repurchases and results in the second quarter;
- and I wonder if this season of results will throw cold water on the stock market.
Quiet post-record
After breaking records last week, stocks closed largely flat on Monday. the
Dow Jones Industrial Average
added 27.13 points, or 0.10%, to close at 27359.16. the
S & P 500
slightly up 0.53 points, or 0.02%, to end at 3014.30, and the
Nasdaq Composite
increased by 14.04 points, or 0.17%, to close at 8258.19.
China 's gross domestic product grew 6.2 percent in the second quarter, the slowest pace of a year on the other since Beijing began publishing the data series in 1992. The growth rate was down from 6.4% recorded for the whole of 2018, but still in line with economists' expectations for a slowdown.
Despite the 27-year low, Andy Rothman, investment strategist at Matthews Asiais not it pessimistic? "It's important to remember that these growth rates are multiplied compared to a base that has quickly spread," wrote Rothman in a report released Monday. "Even though GDP growth was slowing to 6% this year, which is significantly less than a decade ago, when growth was 9.4%, the base is now 182% larger. , so the additional expansion of China's nominal GDP would be 130% larger than the expansion 10 years ago at a faster pace. "
Admittedly, tensions with the Trump administration have led Chinese companies to reduce their production and defer their investments. Corrected industrial production of inflation rose 5.6% from one year to the other in the second quarter, down from 6.6% in the same period of the year. Previous year. In the first half of the year, medium and long-term business loans – an indicator of business investment expenditure – accounted for only 36% of all new loans, compared with 53% in the first half of the year. semester 2017.
But Chinese consumers do not have much impact on tariffs and have continued to make a large contribution to the country's GDP growth through services and consumption. Nominal retail sales increased 9.8% in June over last year, while online sales increased 21.1%, driven by strong revenue growth and stable unemployment. "China remains, in my opinion, the best consumer story in the world," Rothman wrote.
Citigroup said Monday earnings per share of $ 1.95 on a turnover of $ 18.8 billion, which exceeds Wall Street expectations. But this outperformance is largely due to a $ 350 million one-time gain on the bank's investment in
Tradeweb Markets
(TW), which was made public in April.
Aggressive share repurchases are also an important factor in Citigroup's earnings per share. The bank reduced its stock number by 10% in the second quarter compared to last year. And this is not the only case: most major banks are improving shareholder returns through share buybacks and dividends. Upcoming reports from
JPMorgan Chase
(JPM),
Bank of America
(BAC), and
Wells Fargo
(WFC) should also highlight the impact of redemptions on the RPP.
Despite positive Citigroup numbers today, analysts expect the overall profit of the S & P 500 companies in the second quarter to shrink 3% from the previous year, according to FactSet data. Already, more than 80 S & P 500 companies have warned that their second-quarter financial results would be weaker than initially expected, including
Netflix
(NFLX),
Adobe
(ADBE) and
Honeywell International
(HON), according to FactSet.
This will provide a new test for the stock markets that have recently set new highs encouraged by a Federal Reserve dovish.
Write to Evie Liu at [email protected]
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