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Trader Talk with Bob Pisani

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  Monday, 3 Nov 2008 | 9:15 AM ET

No Enthusiasm For A Major Rally

Posted By: Bob Pisani

The search for the elusive bottom continues, but stability is foremost on everyone's mind. That's what we have been getting for the past couple days, and into this morning: the S&P 500 has swung in a roughly 10-point range this morning, downright quiet compared to the prior two months.

And the beaten-up market certainly has room for modest moves up. A good example is Oshkosh, which makes heavy duty vehicles for the fire, construction and defense industries. This morning they beat expectations for their fourth quarter, but also announced they were cutting 10 percent of their workforce, and that 2009 fiscal earnings would be below expectations.

None of this sounds good, but the stock has gone from $30 in June to $7 and change. Beating earnings expectations through September is still worth something, and the stock is trading up 15 percent pre-open.

Still, there is still little enthusiasm for a major rally; traders note that corporate and insider buying remains on the weak side.

  • Calmer November for Stocks
  • S. Korea Unveils Stimulus
  • Post-Election Bounce for Stocks?
  • Coming Soon: "Stimulus 2"
  • Elsewhere:

    1) Two largest banks in Brazil merge: Unibanco being bought by Itau, the combined bank will now have assets of roughly $265 b, making it the largest bank in South America. Unibanco up about 16 percent pre-open (it trades in the U.S. under the symbol UBB).

    2) Circuit City will close 155 of their 712 stores, about 27 percent of their stores. Their vendors are setting more restrictive terms, including in some cases requiring payment befores shipment.

    3) Delayed IPOs: 1) KKR and 2) AMC Entertainment. Eighty-one IPOs have been withdrawed this year, according to Reuters, and there have been none in the past three months.

    4) Ethanol producer Verasun down about 70 percent after filing for bankruptcy on Friday, due to a failed hedging strategy that saw them lock in costly contracts for corn. They are trying to stay in operation through debtor-in-possession financing.

      • Fed Rate Must Not Be Low for Too Long: Lacker

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    _______________________________________
    CNBC's Names in the News:

    Toyota

    General Motors

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    Questions? Comments? tradertalk@cnbc.com

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      Friday, 31 Oct 2008 | 4:33 PM ET

    Market Sell-off Fails In Last Hour

    Posted By: Bob Pisani

    This post is from CNBC producer Robert Hum.

    An attempt to sell off the market in the final hour failed, as the markets rallied once again in the last few minutes of trading. For a while late in the day, the markets appeared it might present an encore of Wednesday’s trade, when the markets gave up all their gains in the last 10 minutes while investors sought to lock in profits from two strong days.

    Friday’s rally gave the Dow & S&P back-to-back daily gains for the first time since late September. The Nasdaq finished up for the fourth straight day—a feat it hasn’t accomplished since May. Today’s gains helped the Dow and S&P post their best weekly performance since 1974.

    The strong week capped off a dismal month, as the S&P had its worst monthly performance in 21 years. For the month: Dow -14%, S&P -17%, Nasdaq -18%.

    Perhaps there might be one bright spot ahead – according to the Stock Trader’s Almanac, since 1950, November is the best month for the S&P 500.

    However, according to Birinyi Associates, since 1915, the Dow has fallen 10% or more in October six times. Unfortunately, when those weak Octobers occurred, the Dow followed up the next month with an average decline of 8%.

    While the markets await the results of the Presidential election next week, important data including auto sales and the October jobs report loom, along with earnings from Cisco Systems and Walt Disney.

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      Friday, 31 Oct 2008 | 10:25 AM ET

    Dow, S&P: October Going To Be Worst Month Since '87?

    Posted By: Bob Pisani

    This post is from CNBC producer Robert Hum.

    October has spooked the markets once again. The Dow and S&P are poised to have their worst month since the crash in October 1987. This month, the Dow is down 15% and the S&P is down 18%.

    The markets have just turned positive, despite weakness overseas and disappointing Chicago PMI data. Keep in mind, the Dow hasn’t posted 2 consecutive days of gains in over a month.

    Japan’s benchmark Nikkei 225 index fell 5% overnight, as the Bank of Japan decided to cut interest rates only by 0.2%, which disappointed many investors. The Nikkei had surged 10% on Thursday on hopes that interest rates would be cut by 0.25%

    Good news: 3-month U.S. Dollar Libor continues to fall. The rate is just above 3%, a far cry from the near 4.9% level it was at a couple of weeks ago.

    Some earnings highlights:

    Chevron’s Q3 net income came in at $7.9 billion, as earnings beat estimates. Just like ExxonMobil, higher crude oil prices helped Chevron’s upstream earnings rise 82% from last year. .Its downstream business also improved from last year, since margins increased as oil prices fell over the past couple of months.

    Shares of telecom BT Group are sharply lower, as the company warned its second quarter earnings will miss estimates due to weakness at its global services unit. In a conference call, the company’s CEO said the earnings disappointment is due to “an internal BT operational matter” and was not a result of the current economic crisis.

  • Your First Move for Friday
  • Take the Fast Money Halloween Poll
  • British Consumer's Mood Sours Further in October
  • Q3 earnings for engine maker Cummins miss analysts’ estimates. Despite strength in its power generation division, the company noted that the slowing economy had hurt its consumer lines. It continues to see weakness in Europe and in the U.S. in the fourth quarter. As a result, it has lowered its revenue guidance for 2008. The company also noted that 61% of its total sales comes from international markets, up from 52% last year.

    In other corporate news:

    Barclaysshares are down nearly 20% after it raised $12 billion in capital from Middle East investors

    Carnival Corp.has suspended its dividend for at least the next quarter to preserve cash. Furthermore, it says it “intends to maintain the dividend suspension” throughout next year, but will continue to reevaluate the policy throughout the year. The company also announced it’s increasing its 2008 guidance due to favorable fuel prices and currency exchange rates offsetting slowing cruise bookings.

    Brazilian miner Companhia Vale do Rio Doce plans to cut production in response to slowing global demand. The company seeks to immediately cut steel production by 20%.

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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, 30 Oct 2008 | 4:30 PM ET

    Deja Vu as Dow Trades in Tight Range...For Now

    Posted By: Bob Pisani

    The Dow has traded in a “tight” 290-point range today. Sound familiar? Well, that’s what happened yesterday, too… until the last hour of trading when the markets’ volatility reappeared, especially in the last few minutes of the trading day.

    Just before midday, the markets hit the lows of the day, but since then, they have gradually climbed back up and are now re-approaching the morning’s highs. The advance has been fairly broad-based as advancers are leading decliners 4 to 1 at the NYSE. Utilities, energy, and tech stocks have regained the momentum that they lost this morning and are leading the markets’ move up this afternoon.

    • Picks & Pans: Trade with CNBC's Experts

    What have been volatile today are the commodities and commodity stocks. Commodities, which started the day modestly higher, turned south as the dollar strengthened throughout the morning. At their settlement today, metals we were weak as copper finished down 9%, aluminum ended down 4%, and gold finished down 2%.

    Energy also posted declines as crude oil fell 2% and natural gas dropped nearly 5%. As commodities fell in the morning, commodity stocks followed suit. At one point, Goldcorp fell 16% off its high, Alcoa fell 7% off its high, and Exxon Mobil fell nearly 6% off its high.

    One big weak spot today is the insurance sector. Hartford Financial has lost half of its value after posting a big loss, triggering greater concerns about its current capital position. Other insurers, including Lincoln National and Prudential Financial, are also down double digits today.

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    - The Dow 30 at a Glance

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    Questions? Comments? tradertalk@cnbc.com

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      Thursday, 30 Oct 2008 | 10:23 AM ET

    GDP: Contraction Less Than Expected

    Posted By: Bob Pisani

    This post is from CNBC producer Robert Hum.

    The markets are up about 2.5% in early morning trading on strength overnight in Asian markets, solid earnings reports, and a better-than-expected GDP number.

    Asian markets surged overnight, as central banks in Hong Kong and Taiwan cut their interest rates, following the Federal Reserve’s rate cut yesterday. Hong Kong closed up 13%, South Korea closed up 12%, Singapore closed up 8%, while Taiwan finished the day up 6%. In Japan, the Nikkei leapt 10% on expectations that the Bank of Japan will also cut interest rates on Friday, which would be the country’s first rate cut since 2001.

    U.S. GDP fell 0.3% last quarter, but the contraction was less that what analysts had expected. Nevertheless, GDP had its biggest fall in 7 years. Contributing to that decline was the 3.1% drop in consumer spending, which was its largest decline since 1980.

    Meanwhile, the dollar continues to move lower today with the U.S. Dollar Index down 2.9% over the last two days. 3-month U.S. Dollar Libor also fell to 3.19%. down from 3.42% yesterday.

    In earnings news:

    ExxonMobil reported record profits, beating analysts’ estimates. Net income jumped 58% from last year to $14.8 billion. Higher prices helped its upstream earnings surge 74%. Additionally, as crude oil prices began to fall, margins in the company’s downstream business improved – helping earnings in that division rise 51% from last year.

    Deutsche Banksurprised investors with a profit in its Q3. Its earnings benefited from some new EU accounting rules, which limited the amount of the company’s writedowns in the quarter. While its CFO said the company is not in need of capital, he said it is “unrealistic to assume” that the bank will pay the same dividend this year as it did last year. Deutsche Bank and many of the other European banks are trading up double-digits.

    Colgate-Palmolive’s EPS beat estimates by a penny. The company saw strength in its international sales, and just like P&G,Kraft, and Kelloggyesterday, it benefited from price increases it set during the quarter.

      • Signs of Recession: Growth Shrinks, Consumers Retreat
      • Investors Get Back Some Appetite for Risk

    _____________________________
    New from CNBC.com:

    - The Dow 30 at a Glance

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    Questions? Comments? tradertalk@cnbc.com

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      Wednesday, 29 Oct 2008 | 4:58 PM ET

    GE Cause Of Late Sell-Off?

    Posted By: Bob Pisani

    Talk about a disappointment. The Dow moved over 400 points in about 5 minutes into the close.

    This is not easy to sort out, but most traders put the bulk of the blame for the sell-off on purported comments from General Electric(our parent network) CEO Jeff Immelt that he wants to keep 2009 profit expectations even if revenues fall 10 to 15 percent. The market took this as no growth.

    However, GE Corporate Communications has told us that Mr. Immelt's comments were taken out of context, and he is not making any new forecasts.

    And, before you blame GE for the selloff, consider this: traders tell me that 500,000 S&P 500 E-mini futures contracts traded from 3:45 to 4:05 PM ET. That is about $23 billion, or 15 percent of the total volume of E-minis traded all day.

    It is somewhat unlikely that that much money would trade on a single headline, even if it is GE.

    That makes it more likely that this was a repeat of Monday's performance, where the Dow dropped 250 points in the last few minutes on no real news.

    • Read Text of Fed's Statement
    • Cut Has Limited Impact on Stocks
    • Gross: Rates to Remain Steady

    This smelled of someone dumping stocks in a big way, taking advantage of the modest gains from yesterday, which has become a distressingly similar story.

    The GE reported comments may have added some fuel to the fire, but something else was likely going on.

      • Fed Cuts Rates Half Point To Lowest Level in 4 Years

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    New from CNBC.com:

    - The Dow 30 at a Glance


    Questions? Comments? tradertalk@cnbc.com

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      Wednesday, 29 Oct 2008 | 12:45 PM ET

    Why Market Is So "Quiet"

    Posted By: Bob Pisani

    This is a strange day: it's relatively quiet! The S&P 500 has moved in a mere 15-point range, until the last 20 minutes, when it has rallied to the highs of the day.

    Traders are citing several reasons for the relatively stable trading range, at least up until midday:

    --Libor rates coming down (12 straight days)

    --The governments commercial paper program appears to be a success;

    --The yen rally (a byproduct of the ending of the yen carry trade) appears to have stopped for the moment.

    There are also a few mechanical events that may be making a difference. Some mutual funds, for example, end their fiscal year on October 31, and there is some speculation that funds will be taking losses to offset any capital gains.

      • Durable Goods Orders Get Unexpected Boost of 0.8%

    There is also some speculation regarding pension funds, which usually do monthly rebalancings to make sure they are within target ranges. Typically, many hedge funds maintain a ratio of 60 percent stocks, 40 percent bonds. But this month has seen such outsize losses (nearly 20 percent on the S&P 500) that there is speculation that a number of pension funds will be forced to buy stocks through the end of the month to maintain their targeted equity allocation.

    This may have been a factor in yesterday's big move late in the day, and in today's 15-point move midday.

    Word that GM and Cerberus may be closer to a deal with Chrysler is also helping stocks.

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    - The Dow 30 at a Glance

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      Wednesday, 29 Oct 2008 | 9:17 AM ET

    Rate Cut Big Help Or Not?

    Posted By: Bob Pisani

    S&P futures have been positive only briefly late in the morning, however there has again been a 40-point swing from the high to the lows. Bottom line is that pre-open volatility continues.

    Futures got a brief pop on a surprising durable goods number (up 0.8 percent, vs. expectations of a decline of 1 percent), however August was revised downward.

    Oil is up 6 percent, its biggest gain in a month, on a weaker dollar. Other commodities are also rallying: silver up 10 percent, copper up 7 percent. Commodity stocks, however, are only up modestly.

    The Fed is expected to cut rates by at least 50 basis points, even though most agree a cut in rates is not going to be a big help in this environment.

      • Fed Prepares to Cut Rate to Fight Financial Crisis
      • Poll: How Much Should the Fed Cuts Rates

    Elsewhere:

    1) Earnings:

    --The good news on earnings is that both P&G and Kraft came in essentially in line with expectations, and both affirmed their full year guidance. The bad news is that much of the gain came on price increases rather than volume growth. Procter and Gamble emphasized their double-digit growth in developing regions. Organic sales, which exclude the impacts of acquisitions, divestitures and foreign exchange, were up five percent for the quarter.

    --Corning, the biggest maker of glass for liquid crystal display (LCD) televisions, said earnings in the current quarter would be well below expectations. Volume in the upcoming quarter is expected to be down 10 to 20 percent.

    A restaurant boosting guidance? Huh? Denny'sdid it...stock is up almost 50 percent pre-open (bear in mind it closed yesterday at $1.28)

    2) Our parent General Electricup 3 percent and Siemensup 11 percent pre-open as Iraq's electricity minister said they are expected to sign deals with both companies worth between $7 billion to $10 billion.

    3) Mortgage rates remain well over 6 percent (6.26 percent, vs. 6.28 percent last week)...this is one area where lower rates would be a real help.

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    - The Dow 30 at a Glance

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    Questions? Comments? tradertalk@cnbc.com

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      Tuesday, 28 Oct 2008 | 5:32 PM ET

    Regulation Topic Number One At Market Conference

    Posted By: Bob Pisani

    At the Securities Industry and Financial Markets Association Annual Meeting, New York.

    How nerve-wracking have the market closes become? Plenty! At the Securities Industry and Financial Markets Association conference, in the middle of a debate with CEOs from four of the largest financial firms in the country, an entire room full of securities professionals began nervously checking their BlackBerrys at 3:58 to see how the market was closing.

    The room glowed with the cool white of BlackBerrys against black suits, and when everyone saw that the Dow was closing up over 800 points, they began nudging their neighbors to show their screens.

    Regulation, but not too much regulation! Please!

    Regulation was topic number one at this conference, nowhere more so than on a panel with four financial industry leaders: William Dwyer, President of Independent Advisor Services, Chet Helck, President of Raymond James Financials, William Johnstone, President of Davidson Companies, and Ronald Kruszewski, Chairman of Stifel, Nicolaus.

    All four sounded similar themes:

    1) We cannot--and do not--have efficient regulators with multiple regulators. Several participants noted that they were regulated by the Fed, by FINRA, by state regulators, and by states attorneys general, who had become "effective regulators." All sought a regulator that was capable of measuring the true risk in the market.

    2) There is a real risk that the regulatory burden will be so severe it will stifle innovation in the industry; one participant worried about a "lynching of the financial services industry", another about a "rush to regulate everything."

      • Treasury May Expand Rescue Plan to Private Banks

    3) Ways must be found to effectively limit leverage, that regulators were not even close to keeping up with the development of financial products.

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    - The Dow 30 at a Glance


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      Tuesday, 28 Oct 2008 | 3:55 PM ET

    International Regulation?  Everyone Agrees, But Devil is in the Details

    Posted By: Bob Pisani

    At the Securities Industry and Financial Markets Association Annual Meeting, New York.

    NYSE CEO Duncan Niederauer and NASDAQ CEO Robert Greifeld are often at odds, but they delivered very similar remarks in back-to-back speeches at the securities industry conference this afternoon.

    Their theme: the financial markets are so intertwined that the only effective regulation has to be global.

    Greifeld in particular emphasized that reforms could not be considered in a merely national context, and that dramatically different levels of regulation had created a "national arbitrage" where various securities were created in one country where regulation was different than other countries, but then sold everywhere around the world.

    This theme was echoed by Niederauer. While both talked about the need for additional regulation, Niederauer said he was not interested in "son of Sarbanes-Oxley," the 2002 law enacted in the wake of the corporate and accounting scandals that introduced new (and many argue overly onerous) accounting and other standards to U.S. corporations.

    Many, including Niederauer, feel that law has put the U.S. at a competitive disadvantage internationally and that many companies have chosen to list in London, where regulations are more relaxed, than in New York.

    During the Q & A, I asked Greifeld how this regulation could be accomplished in practice. For example, while international regulation of banking laws might seem desirable, I noted that no one I had spoken to at this conference was in favor of allowing regulators in Brussels to regulate U.S. banks.

    Greifeld agreed, but said that each country would have to give up something to achieve the goal.

    Odds 'n ends:

    --When all else fails, blame the media. Niederauer drew the only round of laughter and applause in the two rather somber speeches when he told of a CNBC appearance during the height of the market chaos a few weeks ago where Maria and Dylan asked him if there was any truth to the rumors that the NYSE might close at any time. No, he said, the NYSE was not closing at any time, but then he went on to suggest that it might be good if CNBC might close for a few days.

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    - The Dow 30 at a Glance


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    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.

     

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

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