The Dow Jones industrials declined at the open after disappointing economic data out of China. December exports and imports dropped surprisingly in China and the trade surplus with the US widened. We have been reading articles about falling property values, rising defaults and business closures in China. One economic guru gave a speech to business owners in December and in it he cited the actual GDP growth rate at 1.67% which is much lower than the 6.5% growth rate cited by the Chinese gubment. While it is hard to know what exactly is going on in China there is consensus that China’s economy is slowing down. At the close today the Dow was down 88 points on light trading volume at 23,906. IBD has markets in rally mode.
The 2018 Q4 earnings season kicked off today with Citigroup reporting better than expected earnings. Shares of Citi shot higher as bank stocks across the board rallied. While beating earnings estimates, Citi failed to match revenue estimates due to a slowdown in bond trading revenue. Still the company posted a 9% increase in revenue and a 21% increase in net income.
Facing billions in fire related liabilities, Pacific Gas & Electric (PCG) today threw “ace duce” and filed for bankruptcy. The big California utility had seen its stock trade as high as $70 per share back in 2017 but thanks to a deadly mix of unpruned trees, hot dry winds and power lines the company stock fell to $9 bucks as it faces anywhere from $15 to $30 billion in fire related liabilities. At issue is whether PG&E can pass these costs on to rate payers or will it have to eat them which would be hard since the liabilities are at least 5X more than operating income. CEO Geisha “Power to the people” Williams resigned Sunday night along with several other company managers who bolted like startled birds on a wire. All sides are gearing up for a legal fight of epic proportions