Facebook
Twitter
What a difference a day makes. Less than 24 hours after rumors of improved GDP growth in China drove U.S. financial markets up 1% on Thursday, today stocks are falling after those rumors proved untrue.
There’s a lesson in there somewhere – don’t invest based purely on speculation or hearsay, perhaps. Contrary to Thursday’s widely circulating rumors that China’s gross domestic product grew close to 9% in the first quarter, the number was actually 8.1%, less than the 8.3% growth economists were expecting and down from 8.9% GDP growth during the fourth quarter.
China’s economic slowdown has U.S. markets on the decline – some more than others. The Nasdaq has taken the biggest hit, falling 1.1% in mid-day trading. S&P 500 stocks were down 0.8%, while the Dow Jones Industrial Average fell 0.65%.
Today’s pullback concludes an up-and-down week for U.S. financial markets. Stocks took it on the chin Monday and Tuesday, falling more than 1.5% before rallying Wednesday and Thursday. Now they’re back down again, dropping below where they were to start the week.
Compared to most of the rest of the world, China’s GDP growth last quarter was strong. But 8.1% is the slowest growth rate China has seen since 2009.
The China effect on the U.S. markets might have been worse if it wasn’t for strong earnings reports from JPMorgan Chase (NYSE: JPM) and Wells Fargo (NYSE: WFC) this morning. Big banks have been the market leaders in recent months, so strong first quarters by those two banks was deemed critical if stocks are to maintain their year-long rally.
But today at least, solid bank earnings weren’t enough to balance out the disappointing news coming out of China.