Bad News In China Begins An Interesting Week For

China reported GDP at 7.7% year-over-year for the first quarter versus an expected 8%— and the markets toppled. All Asian markets had a bad day; all European markets had a bad day; and all domestic markets opened sharply down. Gold fell over 8% already.

How’s that for a Monday eye-opener?

It would seem a little overdone with China missing Q1 GDP by only 0.3%. But China was already a concern and yen devaluation had been worrisome as well. Perhaps the news out of the Defense Department that perhaps North Korean nuclear technology was a little further along than the CIA had estimated added significantly to the release from China (we learned this by our recovery of the nose cone from recent North Korean missile test, which was reported yesterday).

In the end, the S&P 500 fell 2.3%, blowing through prior support to close at 1552.36. The VIX surged 43% today, reflecting increased investor fears.

Congress seems to be making progress on an economic bill that would be a sharp improvement on the sequestration scenario. Some defined pain is always better than an unknown pain! The markets absolutely hate unknown or ill-defined risks. Corporate America seems healthy with its hordes of cash and slow-but-steady bottom line improvement. Obviously, revenues will be watched closely in the flood of important earnings reports due this week.

Upcoming economic reports include a plethora of housing data, so maybe we can determine how the housing recovery is progressing. The Industrial Production report tomorrow should be another important benchmark to check. Thursday’s Initial Jobless Claims and LEI could help or not. Investors are left with a very interesting conundrum.

From a sector viewpoint, Healthcare remains the most favored sector with Financials and Consumer Cyclicals close behind IF and only IF housing numbers hold up. Of course, Utilities are another possible safe haven as are Consumer Non-Cyclicals.

The S&P 500 fell through the 1570 support level today. Next support is around 1530 with 1485 below that, which would represent a 7% fall from the recent top. Not good, but not disastrous. It should be an interesting week. This smacks of the old Chinese cures: “May you live in interesting times.”

3 Stock Ideas for this Market

This week I looked for stocks at the top of our rankings that were either up slightly or down minimally, despite today’s sell off.

Citigroup Inc. (C)-Financials

Trading for 18x current, and 8x forward earnings

25% of covering analysts revised EPS estimates up for current quarter

Earnings growth projections: 6% current quarter, 12% next quarter

Testing uptrend support

American Capital Agency Corp. (AGNC)-Financials

Trading for 22.8x current and 22.7x forward earnings

Insiders bought heavily at $8

Neutral price pattern, but we like its business model a lot, especially the juicy 15% dividend.

United Therapeutics Corporation (UTHR)-Healthcare

Trading for 10.5x current earnings and 8.5x forward earnings

Projected EPS growth: 32% 5-year, 10.7% in 2013, 14% current quarter