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Trader Talk with Bob Pisani

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  Friday, 14 Nov 2008 | 9:09 AM ET

G20 Meeting: "The Results Will Be Moderate"

Posted By: Bob Pisani

As the G-20 meets in Washington, there is a lot of parsing of commentary from attending politicians. Mexican President Felipe Calderon is probably the most realistic: "This (the G20 meeting) will need to be seen as just the starting point. There will be results, but they will be moderate."

But Nick Kounis, an analyst at Fortis Bank in the Netherlands, has the most widely distributed comment: "We will probably see further falls in output in the first few months of next year, before a gradual improvement later in the year, but we think that there will be no real recovery before 2010."

There are now "official" recessions in Hong Kong, Germany, and Italy.

    • Bernanke: Central Banks Ready to Act

Elsewhere:

1) It makes you wonder: what analysts have been doing with themselves in the past two months. Retailers, for example, have been signaling that consumer spending dropped dramatically in September and October, yet again today and last night FOUR big retailers gave guidance for the fourth quarter (November to January) that is WELL BELOW analyst estimates.

Two other trends are noticeable in retail: 1) third quarter comparable store sales were well below the same period last year, and 2) despite the bad times, several of the retailers went out of their way to say they were looking to take market share from their competitors.

a) Nordstrom said comp store sales decreased 11.1 percent and fourth quarter earnings would come in at $0.35-$0.40, vs. expectations of $0.70 (is seeking to "continue the international expansion of our brands")

b) Kohls said comp store sales decreased 6.7 percent and fourth quarter earnings would come in at $0.90-$1.05 vs. expectations of $1.22. ("we will be very competitive in order to gain market share")

c) Abercrombie is down 8 percent pre-open, said comp store sales decreased 8 percent and fourth quarter earnings would come in at $1.00-$1.05 vs. expectations of $1.57.

d) JC Penney said comp store sales were down 10.1 percent and fourth quarter earnings would come in at $0.90-1.05 vs expectations of $1.32 (will seek to "capitalize on opportunities to maintain and build market share")

2) Nokia is the most actively traded stock, down 13 percent pre-open, noting a "sharp pullback in global consumer spending." They said mobile device volumes will be lower than expected, to 1.24 billion units in 2008, vs. prior expectations of 1.26 billion units, and that 2009 volumes will be down compared to 2008.

3) Sun Micro, as with most companies, beat on the quarter but warned and said they would be laying off 15 to 18 percent of the workforce.

4) Cypress Semi is lowering its fourth quarter guidance as well.

    • Retail Sales Take Record Drop; Import Prices Tumble
    • Nokia Says Crisis Hits Mobile Phone Market
    • Sun Micro to Lay Off Up to 6,000 Workers

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New from CNBC.com:

- The Dow 30 at a Glance

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CNBC's Names in the News:

Nokia

JC Penny

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Questions? Comments? tradertalk@cnbc.com

»Read more
  Thursday, 13 Nov 2008 | 4:46 PM ET

Market's Three Day Losing Streak Ends

Posted By: Bob Pisani

This post is from CNBC producer Robert Hum:

The Dow swung 911 points today, posting its biggest trading range since October 13. The index closed 11% above its session low, erasing yesterday’s losses and snapping a three-day losing streak. Shrugging off grim outlooks by Intel and Wal-Mart , as well as a disappointing jobless claims number, investors bought heavily into the market shortly after the S&P 500 fell through its October 10 low midday.

Take a look at how some of the sectors closed above their session lows today:

Energy +15%
Financials +14%
Retailers +14%
Techs +12%
Materials +12%

After the bellKohl’sQ3 EPS beat estimates by a penny. However, its guidance of $0.90-$1.05 for the fourth quarter falls significantly below the analyst consensus of $1.23. Kohl’s shares are trading 3% lower after hours.

Nordstrom’sEPS beat analysts’ estimates by a couple of cents, but it too issued guidance far short of estimates. Its Q4 guidance of $0.35-$0.45 falls way below the consensus analysts’ estimate of $0.70. The company also expects same-store sales to decline 13%-16% in the fourth quarter.

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New from CNBC.com:

- The Dow 30 at a Glance

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Questions? Comments? tradertalk@cnbc.com

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  Thursday, 13 Nov 2008 | 2:43 PM ET

What's Moving Markets Back Up

Posted By: Bob Pisani

This post is from CNBC producer Robert Hum:

The markets traded in a relatively tight range this morning. However, as the markets drifted lower midday, selling dramatically picked up when the S&P 500 fell below its intraday low of 839.80 that it hit back on October 10.

Once that technical level was crossed, the S&P 500 dropped another 20 points, to a new 5.5-year low. Weakness was broad-based, but financials were notable underperformers, with many large cap banks posting double-digit declines.

Just an hour later, the S&P 500 retraced its losses and found itself once again in positive territory, while showing signs of some buying interest. Volume picked up in the S&P 500 Depository Receipts (SPY) and was particularly strong as the market moved up. In fact, as of early this afternoon, 450 million shares of SPYDERS have already changed hands; well above the average daily volume of 380 million shares. Helping move the markets back up are notable rebounds in energy, industrials, and financials.

Despite the move up this afternoon, the Nasdaq Composite one third of the Dow’s components remain at new lows, as many of the techs and financials continue to hit multi-year lows.

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New from CNBC.com:

- The Dow 30 at a Glance


Questions? Comments? tradertalk@cnbc.com

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  Thursday, 13 Nov 2008 | 9:31 AM ET

Wal-Mart, Intel And Their Bleak Forecasts

Posted By: Bob Pisani

This post is from CNBC producer Robert Hum:

S&P futures are flat, but they have gyrated in a 20-point range this morning. Up about 10 points early in the session, futures moved nearly 20 points lower, before bouncing off those lows following Wal-Mart’s earnings beat.

However, futures have once again have given up some of those gains, as they try to find direction this morning. Both the Dow Industrials & S&P 500 are within striking distance of their multi-year closing lows set on October 27. The Nasdaq Composite closed at a new low yesterday.

Wal-Mart’s Q3 earnings of $0.77 per share slightly exceeded the analysts’ estimate of $0.76, as sales grew 7.5% from a year ago. However, the company cut its full-year guidance due to the strengthening dollar. The dollar—as reflected by the U.S. Dollar Index—has risen 22% since its July low, hurting the repatriation of overseas profits for U.S firms with large multinational operations. The company estimates that dollar appreciation will hurt its Q4 EPS by $0.06. Preliminary Q4 guidance of $1.03-$1.07 falls below the analysts’ estimate of $1.11.

Fellow Dow component Intel also issued a bleak forecast, sending its shares down 5% pre-open. The company dramatically slashed its Q4 revenue guidance to a range of $8.7 billion-$9.3 billion from previous guidance of $10.1 billion-$10.9 billion amid “significantly weaker than expected demand.” This new guidance falls far below the analysts’ estimate of $10.4 billion. Additionally, the company expects its gross margin to be around 55%, down from its prior expectation of 59%. The company’s stock may open near a 12-year low.

    • Intel's "Dramatic" Warning—Was It Really A Surprise?

Similarly, National Semiconductor cut its sales outlook for its current quarter on declining orders. For Q2, the company expects revenues of $420 million-$425 million, down from its prior guidance of $470 million-$480 million. Analysts are expecting Q2 revenues of $461 million. The company also announced it will cut 5% of its workforce.

In other news:

Weekly jobless claims rose higher than expected to 516,000; its highest level since 2001. Three-Month U.S. Dollar Libor rose for the first time today in over a month. The rate rose to 2.14875% from 2.1325% yesterday, but still significantly off its 2.81875% high on October 10.

MBA mortgage applications rose 11.9% last week as mortgage rates fell. The 30-year fixed rate fell too 6.24% from 6.47% last week.

    • New Jobless Claims Pass 500,000 to 7-Year High

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New from CNBC.com:

- The Dow 30 at a Glance

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CNBC's Names in the News:

Intel

Wal-Mart

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Questions? Comments? tradertalk@cnbc.com

»Read more
  Wednesday, 12 Nov 2008 | 4:07 PM ET

New Lows? We've Found Them

Posted By: Bob Pisani

Well, the "we will test the lows" question has been answered. We are again near a 90 percent downside day, where 90 percent of the volume was on the downside. New lows on the NYSE expended to the highest level in several weeks, though far below the spikes we saw in October.

The NASDAQ broke the old closing low of 1505.90. We did not break the old closing low of 848.92 on the S&P set on October 27th, but we are very close. Let's not quibble.

Financials again led the market lower. The consensus is that banks will continue to need more capital, and many feel that a new round of dividend cutting is coming. One-third of the financials in the S&P 500 (28 out of 84 companies) have already cut their dividend this year, eliminating $30.8 billion in dividends.

Yesterday an Italian bank, Intesa, dropped 17 percent after reporting poor earnings and they they would not be paying a dividend for the rest of the year.

The lesson there is that many still own bank stocks for their dividend.

Many financials hit new lows, including Citigroup ,American Express , Goldman Sachs , and Bank of America .

There was considerable debate about the G-20 meeting this weekend. Curiously several large European countries have no bank recapitalization program (France, Spain, Italy, and Ireland); many feel they will enact programs soon.

The other source of weakness was commodity stocks, with new lows in AK Steel, US Steel, International Paper, and others.

Retailers new lows: Abercrombie , Tiffany ,Limited ,Liz Claiborne ,Nordstrom ,Macy's .

Finally, even good news can't seem to help our parent company, General Electric. GE Capital announced they now had access to the FDIC's temporary liquidity guarantee program. Under the program, the U.S. Government will guarantee all GE Capital debt issued from the date they became eligible for the program until June 30, 2009. But GE still ended down about 8 percent.

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New from CNBC.com:

- The Dow 30 at a Glance


Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 12 Nov 2008 | 2:04 PM ET

Paulson's Effect On Markets

Posted By: Bob Pisani

The market has moved lower at Citigroup has broken below $10. Traders obviously felt it was safe to short the market ahead of Mr. Paulson's speech; the most important question now is whether they feel equally confident to short ahead of the G-20 meeting this weekend.

Bulls note this is part of the continuing process of increasing international cooperation. Bears insist nothing substantive will come out of the meeting, and even if broad principles are agreed upon it will not affect the downward trend of the markets.

If the standard pattern of the last few weeks hold, we are due for a modest rally. But the conviction is not high. Mr. Paulson's speech did advance our understanding of the TARP plan and made it clear what his priorities would be for the remaining two months of the Bush administration:

1) keep building capital;

2) help consumers get access to credit by finding a way to back up the asset-backed securities market, and

3) support mortgage modification.

Unfortunately, it raised many questions, including:

1) what will happen to the rest of the TARP money, since he made it clear before embarking on a second capital purchase program, the first one would need to be evaluated, and

2) how to have a facility to back up the asset-backed credit market when this market is regulated by the states.

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New from CNBC.com:

- The Dow 30 at a Glance

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Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 12 Nov 2008 | 10:40 AM ET

Regulators To Banks: Do What We Say Or Else

Posted By: Bob Pisani

Regulators tell banks: do what we say, or else. If there is any doubt that the federal government has taken over (nationalized, socialized) the nation's banking system, consider these headlines from a joint statement this morning from the FDIC, the Fed, and the Treasury.

The regulators:

1) urge banks to make "economically viable & appropriate" loans

2) warn banks not to tighten lending standards too much

3) urge banks to strengthen capital positions

4) warn banks they will take action if dividend policy is inappropriate

5) press banks to modify mortgages

"Urge," "warn," and "press." They are not asking, they are telling, and it's clear they will exercise their power if the banks do not obey.

    • Regulators Pushing Banks To Step Up Their Lending

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New from CNBC.com:

- The Dow 30 at a Glance

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Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 12 Nov 2008 | 9:09 AM ET

How Will Rest Of TARP Be Used?

Posted By: Bob Pisani

The joke on the Street this morning is that Starbucks wants to be part of the TARP—that Peolosi and company thinks everyone needs a $5 latte in this economy.

We should find out what the rest of the TARP will be used for this morning, when Treasury Secretary Paulson speaks. Assumption is he will finally give a clearer outline of what the remainder of the money will be used for.

GM is up 10 percent this morning because everyone believes that they will get some kind of aid, but from the looks of things the insurance industry may beat them to the punch. Genworth has gone from $25 in May to $1.24 yesterday. It's up almost 10 percent this morning for the same reason.

The Bank of England indicated that because inflation may drop below 2 percent in 2009, they could cut rates again; the pound is weaker.

Elsewhere:

1) Best Buy down 12 percent pre-open, lowering fiscal 2009 guidance, to $2.30-$2.90 from $3.25-$3.40. This is not only lower, it is a much wider range to reflect the uncertainty. Comp store sales declined 7.6 percent in October. Comp store sales for the four months remaining in fiscal 2009 (November-February) are expected to decline 5 to 15 percent. Again, this is a very wide range.

The commentary reads like an excerpt from the Book of Revelations: "Since mid-September, rapid, seismic changes in consumer behavior have created the most difficult climate we've ever seen," CEO Brad Anderson said. They are working to adjust inventory levels (read: they're not buying as many TVs, camcorders, etc.)

2) Macys trading up 5 percent pre-open, surprised everyone by beating on earnings for the third quarter ending in October; however if sales trends continue into the fourth quarter earnings will be at the low end of guidance. That is not as bad as some feared.

3) Commodity stocks again weak today.

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New from CNBC.com:

- The Dow 30 at a Glance

_____________________________


Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 11 Nov 2008 | 4:35 PM ET

Market's Dilemma And What Obama Should Do

Posted By: Bob Pisani

Houston, we have a problem. Stocks cannot rally on good news. This is not a good sign for those who are over the global economic crisis and want to get on with their lives.

The Dow rallied over 250 points around the two o'clock hour, then sold right into it. It rallied back a bit in the last 15 minutes. This, despite several pieces of good news in the last two days:

--Fannie Mae & Citi announce mortgage forbearance.

--China stimulus package.

--Libor keeps dropping.

Finally, with the government backstopping everything, one would think the risk is a little less than it was a month ago. Yet here we are, testing the October lows!

What's up? Yes, there are a lot of redemptions, but don't kid yourself. If anyone smelled an imminent, sustainable rally, there would be a lot of money around. Fast.

They don't. That's the problem. The smart money things thinks stocks will not rally significantly until the end of next year. They are in no hurry, because they don’t believe this is the final lows. Therefore they can sell every rally for a while.

Where is money going? A lot of traders seem to be looking to buy high-grade bank loans. Think about it: some are yielding 15 percent, trading at 60 cents on the dollar. Do the math! Twenty-five percent returns! Problem is, no one can buy them because they have to pay cash and the securities are not liquid.

The dilemma for stocks was addressed last night by Nouriel Roubini, the Professor of Economics at the Stern School of Business, and now well-known for his dire predictions about the consequences of excess debt (much of which has come true).

He spoke at a very well-attended BTIG gathering last night, for nearly an hour. I asked Professor Roubini whether the Obama team had contacted him and asked for his advice, and what he felt needed to be done. He said the Obama team had not contacted him, though he had spoken with several members of the team over time, but there were three important steps that were needed:

1) fix the financial system;

2) enact additional stimulus programs, initially $300 to $400 billion, largely in infrastructure programs; and

3) reduce the debt burdens on households.

Importantly, that is exactly what Fannie Mae and Freddie Mac did today: announced plans to reduce the debt burden on households.

He noted that the stock market was in confusion because of the inability to make a concrete prediction about where 2009 earnings would settle out, and indeed the inability to determine what P/E ratio should be appropriate in this environment.

He noted that estimates for 2009 earnings in the S&P 500 had gone from roughly $95 to as low as $60. Price/earnings ratios have been equally confused, with some believing a 10 multiple appropriate, others 12 or higher.

What this means is that estimates on the S&P 500 can come in as low as 600 (!) to 800 or a bit higher. The S&P is currently about 900.

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New from CNBC.com:

- The Dow 30 at a Glance

_____________________________


Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 11 Nov 2008 | 3:38 PM ET

Fannie Mae Gives A Boost (Somewhat) To Stocks

Posted By: Bob Pisani

Stocks rallied (though they are now off their highs), largely on the Fannie Mae announcement on mortgage forbearance. Though it was leaked a few hours ago, it was only known that an announcement would be made today shortly before the 2 PM conference.

The plan would help borrowers who are 90 days or more behind on their mortgage. Payments may not exceed 38% of monthly income. More details will be announced shortly.

What details? We will likely see rate reductions as well as principal forbearance. While this is costly, the thinking is that long-term this will be less costly than allowing homes to go into foreclosure.

Federal Housing Finance Agency Director James Lockhart said the private industry should adopt the same industry standards to modify mortgage loans, but several have already announced mortgage forbearance plans: Citi, JP Morgan, Bank of America .

Interestingly, FDIC head Sheila Bair immediately called it "a step in the right direction but falls short of what is needed to achieve widescale modifications of distressed mortgages, particularly those held in private securitization trusts."

She has become quite outspoken recently and is obviously making sure she stays on the offensive.

Surprisingly, they would still allow loans where the principal, interest, taxes and insurance could be as high as 38 percent of gross income. That is still high: traditionally, 30 percent of gross income was the most lenders would allow to go to the monthly housing bill.

This is a sign of how far out of whack mortgage loans became in the last few years.

Finally, a few traders also noted that Blackstone's CEO Stephen Schwartzman also made positive comments at the same time. Speaking at a Merrill Lynch conference, he noted that THEIR private equity portfolio performing pretty well, and that he would be a buyer of distressed real estate.

_____________________________
New from CNBC.com:

- The Dow 30 at a Glance

_____________________________

_______________________________________
CNBC's Names in the News:

General Motors

Google

_______________________________________


Questions? Comments? tradertalk@cnbc.com

»Read more

About Trader Talk with Bob Pisani

  • Direct from the floor of the NYSE, Trader Talk with Bob Pisani provides a dynamic look at the reasons for the day’s actions on Wall Street. If you want to go beyond the latest numbers— Bob will tell you why the market does what it does and what it means for the next day’s trading.

 

  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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