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Hopes are building for a rescue of Chinese stocks after a drubbing that erased $7T from mainland equities and shares in Hong Kong since their peaks in 2021. An expected rebound from strict zero-COVID measures has failed to materialize, prompting policymakers to consider new ways to stabilize the stock market, with risks to consumer confidence threatening another downward spiral. "China's equity market followed up a very weak 2023 with another 10% loss in the first three weeks of 2024," Principal Financial Group noted in a new SA article, China Outlook: Market Rescue Welcomed, But More Needed.

Growth challenges: Two other major issues were recently flagged in Wall Street Breakfast that highlight the problems facing the world's second-largest economy. Evergrande (OTCPK:EGRNQ), the world's most indebted property developer, was finally ordered to liquidate last week, spelling further trouble for the Chinese construction industry which accounts for as much as a quarter of GDP. A longer-term growth issue is related to demographics, with China's shrinking population set to sap the nation of a key source of labor and demand.

Looking to end the country's stock market rout, fresh reports overnight suggested that the China Securities Regulatory Commission and other regulators will soon update top authorities on a range of policy initiatives. China's blue-chip CSI 300 Index soared 3.5% on the news, while small-cap equities recorded an even bigger bump, with the CSI 1000 Index jumping 7%. Support could range from direct stimulus measures to those geared toward property stabilization, but investors sizing up the situation will be looking for concrete actions or a coordinated response to assuage their concerns.

Will it impact the U.S.? Fed Chair Jay Powell touched on the matter during a 60 Minutes episode that aired on Sunday, saying China had moved away from a "market-led growth model" in favor of state-owned enterprises and there was "still too much associated with real estate investment." He also pointed out that economic relations are not deeply intertwined with the American financial system, but rather mostly consist of the U.S. buying Chinese manufactured products. As long as that is the case, that would mean minimal implications, according to Powell. "We may feel them a bit, but they shouldn't be that large."

Riding the wave

Palantir Technologies (PLTR) surged 17.3% to $19.61/share AH on Monday as the enterprise software company's Q4 revenue topped expectations. "Our results reflect both the strength of our software and the surging demand we are seeing across industries for AI platforms," CEO Alex Karp declared. "Our U.S. commercial business continues to be a significant driver of our growth, a trend that we expect to continue." Investing Group Leader Ahan Vashi still advised caution, as mixed guidance issued for 2024 was "not exceptional, and as of now, Palantir is not showing AI-powered hypergrowth!" (95 comments)

New rules

Aiming to fix structural issues in the $26T Treasury market, the SEC is expected to adopt a rule today requiring proprietary traders and companies that regularly deal in U.S. Treasuries to register as broker-dealers. The new rule, and a recently passed requirement for hedge funds to clear more of their Treasury trades centrally, are aimed at boosting regulatory oversight and would mark the biggest overhaul of the market in decades. Some concerns have also been raised. Those include the increasing costs needed to participate in the industry, as well as "unnecessary regulatory burdens" on pensions and risks of a major liquidity drain, among others.

Streamlining season

Layoffs continue to roil across the tech sector, with more than 120 tech companies giving pink slips to a combined total of more than 32,000 employees during the first five weeks of 2024, according to Layoffs.fyi. In 2023, tech firms made about 260,000 workers redundant. These companies are continuing to streamline costs and improve efficiencies amid constant pressure to match the growth and profit expectations of investors. Tech companies that have announced job cuts so far this year include Snap (SNAP), PayPal (PYPL), Google (GOOGGOOGL), Microsoft (MSFT) and Salesforce (CRM). (80 comments)

Today's Markets

In Asia, Japan -0.5%. Hong Kong +4%. China +3.2%. India +0.6%.
In Europe, at midday, London +0.5%. Paris +0.3%. Frankfurt -0.1%.
Futures at 7:00, Dow -0.1%. S&P -0.1%. Nasdaq -0.1%. Crude +0.6% to $73.23. Gold flat at $2,042.30. Bitcoin -0.8% to $42,823.
Ten-year Treasury Yield unchanged at 4.16%.

Today's Economic Calendar

12:00 PM Fed's Mester Speech
1:00 PM Fed's Kashkari Speech
1:00 PM Results of $54B, 3-Year Note Auction
2:00 PM Fed's Collins Speech
7:00 PM Fed's Harker Speech

Companies reporting earnings today »

What else is happening...

WSB survey results: Subscribers split on U.S. four-day workweek.

Novo (NVO)-Catalent (CTLT) deal to ease Wegovy supply concerns.

Caterpillar (CAT) shares hit record high after earnings beat estimates.

Virgin Galactic (SPCE) reports flight issue to FAA amid ongoing review.

Restaurant stocks fall as McDonald's warns on new pricing environment.

Estee Lauder (EL) rallies as job cuts overshadow downbeat guidance.

Historic Southern California storm threatens flooding and landslides.

Archer-Daniels-Midland (ADM) faces DOJ probe on accounting practices.

Alcoa sinks as Trump threatens tariffs on Chinese imports if re-elected.

NYCB's (NYCB) drastic financial moves followed tense talks with OCC.

More on today's WSB topics

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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