Pisani's Trader Talk: Housing, Debt and Inflation Worry Markets
CNBC's Bob Pisani reports on what traders are telling him this afternoon:
Several trends are very much in evidence today.
Pulte, which predicted no recovery in home prices last week, joined today by Countrywide and US Gypsum in what can now be called the "Housing 2009" crowd.
Countrywide CEO Mozillo: housing recovery unlikely until 2009
US Gypsum: in second year of "multiyear downturn" in housing
Countrywide particularly worrisome because they referenced losses in home equity loans. This is not subprime.
2) Corporate bonds.
Bill Gross in his monthly letter highlighted the continuing issues in the corporate debt market. Specifically, investors want more yield to compensate for what they believe are higher risks, and they are not impressed that there have been no avalanche of downgrades from the rating agencies on corporate debt.
As Gross noted, "To be blunt, they seem to be thinking that if Moody's and Standard & Poor's have done such a lousy job of rating subprime structures, how can the market have confidence that they're not repeating the same structural, formulaic, mistake with CLOs and CDOs?"
That's why high yield issues from LBO market are getting stalled: it's a confidence issue.
3) Inflation back?
With all the concerns about LBO deals and subprime, inflation has not been an issue
But read earnings reports today, you will hear companies across a wide spectrum of industries complain about higher costs and its impact on the bottom line. Some are able to raise prices, some not.
Companies who complained about higher costs today:
Rohm & Haas: chemicals
US Gypsum: wallboard
CKE Restaurants: food
CKE, which owns the Hardees and Carl Jr. restaurant chain, was particularly notable. They complained about higher prices for beef, pork, oil and cheese.
4) Energy stocks weak.
If that’s not enough, the market leader—energy—is notably weak today.
The reason: oil down 3 days row, gasoline 3 month lows.
Refiners like Sunoco, Tesoro and Valero have been getting slammed for a week; the rest of the energy sector getting hit hard now.