U.S. Stocks Will Not Escape Impact of China Slowdown, Europe Recession
General Electric Company (NYSE/GE) is the world’s largest manufacturer of medical imaging equipment. They are an S&P500 company and have warned that their sales would be affected by the recession in parts of Europe. This would in turn affect the earnings reports of GE. Another company within the S&P500 that is affected by the slowdown in China is 3M Company (NYSE/MMM). Their sales and thus the earning reports of 2012 will be affected by the slowdown in China. Another S&P500 company affected by the European recession is The Dow Chemical Company (NYSE/DOW). They had to cut over nine hundred jobs and shut down five of their factories. The company’s profit growth will be lowered when the earning reports would be released all through the year. McDonald’s Corporation (NYSE/MCD) is yet to release any of its earning report for 2012. This S&P500 Company has however said that in the month of February, its same-store sales were lower in Europe as the consumers cut down on their expenses due to recession. Fluid Power Systems manufacturers- Parker Hannifin Corporation (NYSE/PH)- yet another S&P500 company cut down on its profit estimate for the whole year. They cited lesser demands for their products across Asia and Europe as the reason. Staples, Inc. (NASDAQ/SPLS) is another S&P500 company that reduced the profit estimate for 2012. The European recession was cited as the reason. Moreover, they are cautious, yet optimistic about their performance in U.S economy.
The above statistics show that the economic recession in Europe and the economic slowdown in China have had a severe and significant impact on S&P500 companies. It is also obvious that there will be more disappointments with respect to earnings and company performances in the near future. This is strictly speaking about the American companies. The main reason attributed to these disappointments is inflation, rapid and steep rise in the prices of commodities, and slower growth of the international markets.
When it comes to stock trading there are many big and small companies in the stock markets. However, stock trading is done only with those companies that have a scope of multiple earnings in the future. S&P500 companies experiencing weaker earnings growth due to their exposure to China and European markets record a high corporate trading bodes. Such companies are simply in the bear market rally. General public are under the impression that there is substance in the bull market rally. This also leads them to believe that there is considerable domestic as well as international economic growth. However, they are in for a rude shock when they discover that there is no substance in either economic growth (domestic or international) or in stock market rally.
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