China is once again the point of risk and pain for global markets to start this week. Over the weekend, we got news that China will crack down on education technology .
Anyone who’s been following me knows I’ve been highlighting why I’m short on China stocks and have been pulling money out of there for months now.
This story arc and reality won’t be going away any time soon — it’s only going to get bigger.
For those who missed the news, China is basically getting rid of a $100 billion online education industry and forcing it to go nonprofit. China announced new reforms for private education companies in an effort to decrease student workloads and dismantle a sector it believes has been “hijacked by capital.”
The new regulations will ban online education companies teaching curriculum from making profits, raising money or going public.
The Ministry of Industry and Information Technology (MIIT) — it’s like the Chinese internet police — decided to launch a six-month campaign that’s designed to solve issues that the internet industry has, like: disturbing market order, endangering data security and infringing users’ rights.
And, woof, Wall Street did not like this latest development.
The sell-off in Chinese private education technology companies caused chaos in the stock market Monday morning. Investors began to panic sell their China stocks as they priced in the growing risks of the government crackdown on their own education-technology companies.
But, guys, I can’t stop focusing on the phrase “hijacked by capital.”
This internal aggression against capitalism is a massive game-changer for the global stock market…
And soon, I expect the Communist Party of China to turn the gun on Western companies they view as getting too influential…
However, the China crackdown on education technology isn’t all that’s making market moves this week.
China Crackdown on Education Technology and More Market Movers
Guys, this is a massive week for earnings and investors need to stay on high alert for what’s coming our way.
Earnings start today with Tesla Inc. (Nasdaq: TSLA). Then over the week we’ll see Microsoft Corp. (Nasdaq: MSFT), Amazon.com Inc. (Nasdaq: AMZN) and Alphabet Inc. Class A (Nasdaq: GOOGL) — to name a few.
First off, Tesla will give us a real view of how the automobile semiconductor chip crisis is going. I suspect it might be much more serious than investors realize, and it’s an easy excuse for less-than-stellar earnings. Everyone wants to see Tesla’s operating profit break out above $1 billion — that’s one of the key metrics. I guess we’ll just have to wait and see.
I expect the latter three big tech companies — MSFT, GOOGL and AMZN — will have great quarters. But what’ll be interesting to see is how muted the stock price action is compared to a big beat on expectations.
On Wednesday, we have the FOMC interest rate decision. Of course, the game is as it always will be: It will talk about considering tapering in hushed tones. I expect Federal Reserve Chair Jerome Powell will continue his nonsensical denial of obvious inflation concerns.
I’m wondering if he’ll mention any division with the board on the Fed’s forever stimulus agenda.
Keep a close eye on 10-year Treasury yields — it’s a key market driver right now! The Fed is entirely market reactionary and desperate to keep the S&P 500 pumped. This means traders can try to fade any weakness heading into the FOMC meeting, as you know the central bank will be dovish to prop up the market…
Be sure to share your thoughts on the China crackdown on education technology, and everything else we discussed today in the comments section below.
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