A weak market

JP Morgan and Wells both presented strong, relative to Wall Street expectations, performance yesterday. However, the Street didn't appreciate it at all. The market dropped by more than one percent.

Often, when the markets act astray to expectations, it is time to consider it will turn around the trend. Given the current situation, it is indeed a logical reaction. Look back from October 2011, the market has been up almost non-stop up 30%. The uptrend was largely motivated by Fed's loosened monetary policy promise and fund rebalanced to equity market. Capital influx was impressive. More than once we heard fund managers and investors said they had to buy stocks because other investments couldn't make up expected returns. They were emboldened to take risk.

Some five months after that, we can review what companies and overall economy have been achieved. House builders have less construction. Housing market sees a bottom but may have another tide of foreclosure. Alcoa had a profit but will continue to cut capacity. China slows down their pace. After a quiet period of Europe debt problem, attention turns to Spain again, even though it seems it is orchestrating with bearish view in the market. The two banks mentioned above did well in terms of revenue and profit but at the expense of reducing reserved capital. Here is a read from Wells' report from the New York Times:

For Wells Fargo, which recently supplanted Bank of America as the nation’s leading mortgage lender, home loans were also a source of strong growth, as was lending to corporations. Revenue at Wells Fargo rose 6 percent, to $21.64 billion, the highest level in more than two years. Until now, the bank’s revenue had steadily declined for several quarters. In the first quarter of last year, for instance, the bank’s revenue dipped 5 percent.

All indicates that the market is weak and deems for a correction. However, long term speaking, the U.S. market is still bright.