• 287 days Will The ECB Continue To Hike Rates?
  • 288 days Forbes: Aramco Remains Largest Company In The Middle East
  • 289 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 689 days Could Crypto Overtake Traditional Investment?
  • 694 days Americans Still Quitting Jobs At Record Pace
  • 696 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 699 days Is The Dollar Too Strong?
  • 699 days Big Tech Disappoints Investors on Earnings Calls
  • 700 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 702 days China Is Quietly Trying To Distance Itself From Russia
  • 702 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 706 days Crypto Investors Won Big In 2021
  • 706 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 707 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 709 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 710 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 713 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 714 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 714 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 716 days Are NFTs About To Take Over Gaming?
Tesla Struggles To Compete In European Market

Tesla Struggles To Compete In European Market

Tesla continues to catch the…

Strong U.S. Dollar Weighs On Blue Chip Earnings

Strong U.S. Dollar Weighs On Blue Chip Earnings

Earnings season is well underway,…

  1. Home
  2. Markets
  3. Other

Trouble in China, and Trouble for U.S. Banks?

Our country's top Banks and Financial institutions were downgraded yesterday.Stocks included in the downgrade were: BAC, JPM, WFC, C, MS, and GS.

But at 7:16 AM this morning, the futures were indicating that ALL of them were showing a pre-market rise in their values.

Does this make sense? It is the equivalent of having a drop in your credit rating, but with the credit card companies wanting to lower your interest rates because of it.

But, everything has a reason, whether it is a good reason or bad reason.

The "reason why" explanation from the media is because China just had the first just cut on reserve requirements for their banks in almost three years.

It sounds good on the surface, but why did China lower its reserve requirements?

The answer is because their national growth rate was in jeopardy and slowing down too fast, so they are trying to re-prime the pump. This was a panic move by China last night, due to worry about further slipping of growth and the problems the current slippage is causing now.

What problem is that?

Labor union and worker unrest in increasing because factories are cutting overtime hours. For many in China, living on non-overtime work hours is just not possible, so disappearing overtime is causing huge protests by Chinese citizens. It is actually one of China's worst labor unrest situations they have seen and this is a problem that they do not want to see getting any worse.

Investors are worried about banks on a global basis now, and for good reason. Exposure to borrower debt that may never get paid is causing consternation. And this is causing perceived and real risk levels to increase in the banking sector.

Take a look at this morning's chart ... It shows the weekly action of the Banking Index in the U.S. While the SPY continued its up trend in early 2010, the Banking Index started a down trend in 2010 that is putting the S&P 500 under extreme stress. The reason is because the financials are the second larger sector in the S&P 500. At the close yesterday, the financial sector represented 13.08% of the S&P 500. If the Banking Index falls below 33.2, it will inflict serious harm to the S&P 500. (FYI ... the symbol for the Banking Index is $BKX.)

SPY Index

 

Back to homepage

Leave a comment

Leave a comment