BURSTING: China's GDP - Jobless Claims - Goldman Sachs EPS (01-21-10)

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(Discussed Tickers: NYSE: GS, NYSE: BAC, NYSE: JPM, NYSE: C, Nasdaq: GOOG, NYSE: WGL, Nasdaq: SGMS, NYSE: WPI, NYSE: AXP, NYSE: BXS, Nasdaq: BRKL, NYSE: BNI, NYSE: COF, NYSE: CMA, Nasdaq: CNXT, NYSE: ED, NYSE: CAL, Nasdaq: CBST, Nasdaq: DGII, Nasdaq: EFII, NYSE: ELX, Nasdaq: EZPW, NYSE: FCS, Nasdaq: FITB, Nasdaq: FNFG, Nasdaq: FSGI, NYSE: FCX, NYSE: GMT, Nasdaq: HOMB, NYSE: IBN, NYSE: IMN, Nasdaq: INDB, Nasdaq: IIIN, Nasdaq: IBKR, NYSE: IGT, Nasdaq: ISRG, NYSE: ESI, Nasdaq: JJSF, NYSE: KEY, Nasdaq: NITE, NYSE: LM, Nasdaq: LYTS, Nasdaq: MATW, NYSE: MDZ, NYSE: MDP, Nasdaq: VIVO, Nasdaq: MSCC, Nasdaq: NTCT, Nasdaq: OCFC, Nasdaq: PCBK, Nasdaq: PBCT, NYSE: PNC, NYSE: PPG, NYSE: PCP, Nasdaq: SFNC, Nasdaq: SMTS, NYSE: LUV, Nasdaq: SBIB, Nasdaq: SIVB, Nasdaq: SYNA, NYSE: TCB, Nasdaq: TWIN, NYSE: UNP, NYSE: UNH, Nasdaq: ULGX, NYSE: VLY, Nasdaq: WABC, NYSE: WAL, NYSE: WDC, Nasdaq: WIBC, NYSE: WNS, NYSE: XRX, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ)

China's GDP, Jobless Claims & Goldman Sachs' EPS Burst!

The day's market-moving news highlights bursting data in China's GDP growth, weekly initial jobless claims and Goldman Sachs' EPS results. However, President Obama, with the help of the Legion of Doom (read torch wielding liberals), will do his best to pour some water on what should otherwise have been a market catalyst of a day. Still, taming Wall Street excesses in the way the President seeks to today makes a whole lot of sense. It's just poor timing is all, which we are getting used to out of this Administration.

Weekly Initial Jobless Claims

Weekly Jobless Claims were reported for the week ended January 16 this morning. New benefits filers increased by 36,000, to 482,000. We have been warning you for weeks that claims would likely return to higher numbers following the holidays, something that seems logical to most of us but is somehow missed by economists (who can get lost in numbers). According to Bloomberg, economists were forecasting 440K new filings this week on average.

China's Super GDP Growth

We also pre-told you that China would likely post excessively strong GDP growth this week, given its preemptive action to curb its banks' lending via increased reserve ratios last week. The Chinese government may have intended to make public the bad news (curbs) first, so that its strong GDP growth would overshadow it in the lasting investment community mindset.

China's GDP grew 10.7% in the fourth quarter when compared against the prior year mark. Q4 growth continued a heating trend, with Q3 growth at 9.1%; Q2 at 7.9%; and Q1 at 6.1%. Incidentally, the first quarter of 2009 marked the trough for China's economic growth, and the closest it came to joining the global recession. China's growth reached as high as 13.0% in the first quarter of 2007. There remains concern that inflation may be heating in China, and that its government might damage growth as a result, but that should not quell global market enthusiasm today.

Obama Plays Party Pooper

President Obama is starting to show his ugly side. Today, he is announcing new regulations on banks, some of which ought to anger a few Wall Street firms that were coerced into becoming bank holding companies. The President is seeking to limit the size and complexity of banks, and to cut their ability to enter into high-risk activities. Becoming a bank turned Kosher in the most intense moments of the financial crisis, but now it's time to pay the piper now.

Obama is trying to solve the "too big to fail" problem, but firms like Goldman Sachs (NYSE: GS) have made a killing through the work of their proprietary trading desks. Firms like Goldman will now have to decide what's worth more, cheap borrowing opportunities or a free-trading environment. We expect that with government stimuli on the way out, we will see Goldman, and maybe others like J.P. Morgan Chase (NYSE: JPM), Citigroup (NYSE: C) and Bank of America (NYSE: BAC) now spin out their recently adopted partner firms. Timothy Geithner may have broken the bad news to Wall Street last night during a private dinner party. The President goes public with the details later today.

Speaking of Goldman!

Goldman Sachs (NYSE: GS) today reported another astounding operating quarter. Goldman earned $4.79 billion in the fourth quarter, on gains in its trading business. Per share profits amounted to $8.20, well ahead of analysts' expectations for $5.20, according to Thomson Reuters. Controversy will only intensify, as the company also announced it paid out $16.2 billion in salaries and bonuses in 2009. The stock was down fractionally in the early going, given the President's souring news pending. The party may truly be over for Goldman's low cost of capital and big return talent.

I guess to appease those who might be perturbed by the company's bonus news, Goldman left $500 million out of its bonus pool, to be paid out to charity. We are guessing that is not going to be enough for the torch bearing Democrats, err Main Streeters, err is it peasants, or is it perhaps those seeking justice and fairness? We can't wait to hear what you think... Comment below.

Leading Indicators

After hearing China's GDP news, economists will be looking for some benefit in the Leading Indicators here in the US, which will be reported on Thursday morning at 10:00 AM. After a 0.9% increase in November, economists are looking for moderation of growth to 0.7% in December.

Philly Fed Survey

The Philadelphia Fed Survey is due at 10:00 a.m. as well. The index improved to 22.5 in December, but economists are looking for some moderation in January's first look, to 18.0. Similar surveys from New York and Chicago have supported the Philly data of late. New York's Empire State Manufacturing Survey showed last week that its General Business Conditions Index recovered ground, moving to 15.9, up from 4.5 before that.

Petroleum and Natural Gas Inventory

The EIA's Natural Gas and Petroleum Status Reports will both be released on Thursday this week, due to the holiday. At 10:30, we will get a first look at Natural Gas inventories. In the week ended January 8, nat gas stocks declined by 266 Bcf, and the great draw of 2009/2010 continues. Stores of natural gas stand now only 121 Bcf higher than the five-year average for this time of year. Expect to see more pressure on natural gas prices as usage is closing inventory down at a rapid rate.

The EIA's Petroleum Status Report is up at 11:00 a.m. this week. For the week ended January 8, crude oil inventory increased by 3.7 million barrels, and stands above the upper limit of the average range for this time of year. Gasoline stores increased by 3.8 million barrels and stood above the upper limit of the average range. Distillate fuel stocks increased by 1.4 million barrels last week, and are also above the upper boundary.

Washington Activity

Look for the Fed Balance Sheet and Money Supply data in the late afternoon. Also in Washington, the House Financial Services Committee will inspect the bank failure situation.

Corporate News Drivers

DealFlow Media is hosting an activist investor conference in New York. WGL Holdings (NYSE: WGL), Scientific Games (Nasdaq: SGMS) and Watson Pharmaceuticals (NYSE: WPI) have analyst meetings arranged. The earnings schedule highlights news from Google (Nasdaq: GOOG), Goldman Sachs (NYSE: GS), American Express (NYSE: AXP), BancorpSouth (NYSE: BXS), Brookline Bancorp (Nasdaq: BRKL), Burlington Northern (NYSE: BNI), Capital One Financial (NYSE: COF), Comerica Inc. (NYSE: CMA), Conexant Systems (Nasdaq: CNXT), Consolidated Edison (NYSE: ED), Continental Airlines (NYSE: CAL), Cubist Pharmaceuticals (Nasdaq: CBST), Digi International (Nasdaq: DGII), Electronics for Imaging (Nasdaq: EFII), Emulex (NYSE: ELX), EZCorp (Nasdaq: EZPW), Fairchild Semiconductor (NYSE: FCS), Fifth Third Bancorp (Nasdaq: FITB), First Niagra Financial (Nasdaq: FNFG), First Security Group (Nasdaq: FSGI), Freeport-McMoRan (NYSE: FCX), GATX Corp. (NYSE: GMT), Homebancshares (Nasdaq: HOMB), ICICI Bank (NYSE: IBN), Imation (NYSE: IMN), Independent Bank (Nasdaq: INDB), Insteel Industries (Nasdaq: IIIN), Interactive Brokers (Nasdaq: IBKR), International Game Technology (NYSE: IGT), Intuitive Surgical (Nasdaq: ISRG), ITT Educational (NYSE: ESI), J&J Snack Foods (Nasdaq: JJSF), KeyCorp (NYSE: KEY), Knight Capital Group (Nasdaq: NITE), Legg Mason (NYSE: LM), LSI Industries (Nasdaq: LYTS), Matthews International (Nasdaq: MATW), MDS Inc. (NYSE: MDZ), Meredith Corp. (NYSE: MDP), Meridian Bioscience (Nasdaq: VIVO), Microsemi (Nasdaq: MSCC), NetScout Systems (Nasdaq: NTCT), OceanFirst Financial (Nasdaq: OCFC), Pacific Continental (Nasdaq: PCBK), People's United Financial (Nasdaq: PBCT), PNC Financial (NYSE: PNC), PPG Industries (NYSE: PPG), Precision Castparts (NYSE: PCP), Simmons First National (Nasdaq: SFNC), Somanetics (Nasdaq: SMTS), Southwest Airlines (NYSE: LUV), Sterling Bancshares (Nasdaq: SBIB), SVB Financial (Nasdaq: SIVB), Synaptics (Nasdaq: SYNA), TCF Financial (NYSE: TCB), Twin Disc (Nasdaq: TWIN), Union Pacific (NYSE: UNP), UnitedHealth Group (NYSE: UNH), Urologix (Nasdaq: ULGX), Valley National Bancorp (NYSE: VLY), Westamerica Bancorporation (Nasdaq: WABC), Western Alliance Bancorp (NYSE: WAL), Western Digital (NYSE: WDC), Wilshire Bancorp (Nasdaq: WIBC), WNS Holdings (NYSE: WNS) and Xerox (NYSE: XRX).


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