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Trader Talk with Bob Pisani

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  Monday, 21 Apr 2008 | 9:37 AM ET

Bank Of America Continues Monday Woes

Posted By: Bob Pisani

Monday has not been a great day for bank earnings. Last Monday it was Wachovia that disappointed, today futures dropped at 7 am ET as Bank of Americacame short of expectations.

Considerably short: $0.23 vs. expectations of $0.41. Still, we are once again in the "it could have been worse" mode which proved to be a successful argument for Merrill Lynch and Citigroup .

B of A is more heavily exposed to the domestic economy than some of its competitors. They have by far the largest retail banking operations; they get about half of their revenues from loans and leases. Credit card income is about 10 percent of their revenues. So a lot are looking to them for comments on the state of the consumer.

They didn't say much, but the numbers could have been worse.

The bad news: about $2 b in writedowns for CDOs and leverage loans. The good news: some analysts, including UBS , were expecting much worse: $2-$4 b of losses.

Bad news: credit card losses rose, but (good news!) they were not as bad as some feared.

Surprisingly, they are still making plenty of loans, and deposit growth is strong (as it is at many banks).

More good news: no dividend cuts, no capital raising announcements. Bottom line: it could have been worse. Stock about unchanged.

Elsewhere:

1) Pharmaceutical companies are continuing to report comparatively poor earnings, on the heels of Pfizer's poor showing last week.

Merckbeat on bottom line , but revenue fell short of expectations, though they did affirm their full year outlook.

Controversial cholesterol lowering drugs Vytorin and Zetia showed significantly slower sales growth. Merck reiterated the full-year guidance they gave earlier in the year. Up 2 percent pre-open.

Lilly fell short of expectations . Sales of antidepressant drug Cymbalta were strong, as was Ciallis sales. But other drugs, including Zyprexa, were lower than expected. Down 2 percent.

2) Halliburton was in line with expectations. International profits were strong (Q1 revenue was up 24 percent outside of North America), and it was somewhat surprising to see North America up 11 percent as well. Up about 1 percent pre-open.

3) National City getting set for $6 b capital infusion from Corsair Capital, according to the Journal. Down 8 percent.

4) Mattel missed, reporting poor growth in the U.S.,somewhat offset by modest growth overseas.


Questions? Comments? tradertalk@cnbc.com

»Read more
  Friday, 18 Apr 2008 | 4:49 PM ET

Weak Start Ended Being A Strong Week

Posted By: Bob Pisani

The week started out poorly, with Wachovia Bank disappointing, and creating fears that the financials would simply fall apart. It didn't happen; Merrill Lynch and Citi reported big writedowns and poor earnings; but they were not dramatically worse than expected, and those stocks rose, along with most other financials.

Outside of that, earnings were good, with strong tech reports from IBM, Intel, Google, and AMD. Industrials like Caterpillar, United Technologies, and Honeywell were also strong.

»Read more
  Friday, 18 Apr 2008 | 2:43 PM ET

CAT CEO Owens: We Need Free Trade

Posted By: Bob Pisani

Caterpillar CEO Jim Owens was just on our air with Erin Burnett, and made very important comments about agricultural subsidies and the need to maintain global free trade.

Cat is at an 8 month high on its strong earnings . I'll again note the tremendous global growth they (and Honeywell ) are saying, which is soothing concerns about a global economic slowdown, at least in the industrial area.

Here's what happened in the last quarter:

North America up 3 percent
Europe/Australia/Middle East up 27 percent
Asia/Pacific up 35 percent
Latin America up 18 percent

What about Caterpillar's future? They have adjusted their regional revenue forecasts DOWN for North America but UP for everywhere else.

Revenue forecasts:

North America: lower
Rest of world: higher

There are still plenty of worries. The weak dollar has been a big help to them with all the overseas growth, but what happens if the dollar strengthens. Perhaps more importantly, how do you meet your earnings targets when costs are inflating, and due to the weaker U.S. and European economy you are likely to experience softer pricing?


Questions? Comments? tradertalk@cnbc.com

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  Friday, 18 Apr 2008 | 11:07 AM ET

Caterpillar's Global Growth Story

Posted By: Bob Pisani

Caterpillaris an excellent example of how global growth is helping the bottom line of big corporations. Here's the story: global growth is NOT decelerating to any appreciable extent; in fact, it is strong and, in some cases, getting stronger.

Caterpillar now gets two-thirds of its sales outside the U.S.; they are maintaining 2008 guidance even though North America looks weak, because global sales are so strong.

Here's what happened in the last quarter:

North America up 3 percent
Europe/Australia/Middle East up 27 percent
Asia/Pacific up 35 percent
Latin America up 18 percent

More importantly, they have adjusted their regional revenue forecasts DOWN for North America but UP for everywhere else.

Asia/Pac sales up 15-20 percent from previous up 10-15 percent
Europe/Australia/Middle East up 7-12 percent from earlier up 5-10 percent
Latin Am. up 15-20 percent from up 10-15 percent
N. America down 2 percent to up 2 percent from previous flat to +5 percent

It's not all sunshine; rising raw material costs is a real problem for them. But the international sales are extremely encouraging.


Questions? Comments? tradertalk@cnbc.com

»Read more
  Friday, 18 Apr 2008 | 9:25 AM ET

Citi, Industrials Providing Some Relief

Posted By: Bob Pisani

Citiis providing the main upside impetus, but relief that big industrials like Caterpillar and Honeywell did not repeat GE's concern that last two weeks of March fell apart, is also a big help; the dollar has rallied. Today is an options expiration day.

For Citigroup , similar to Merrill Lynch : earnings a tad worse than expected, but not much (loss of $1.06 vs. estimated loss of $0.95), writedowns a bit worse but not dramatically so. Non performing assets were up 16 percent, but that seems less than expected. Perhaps most importantly, CEO Vikrim Pandit is out on the conference call saying the leveraged loan market is beginning to trade. Citi up 8 percent pre-open.

What's up in China? Reported strong GDP growth of over 10 percent this week, but you wouldn't know it looking at the Chinese stock market: the Shanghai Composite Index is at a 52-week low, though Hong Kong is holding up a bit better. The Chinese government has been tightening its monetary policy to slow economic growth.

What happened to the deterioration in the last two week of March that GE talked about? It didn't happen to Caterpillar . They reported earnings of $1.45, 12 cents ahead of expectation, revenues ahead of expectations as well. Maintaining 2008 guidance. Again, look at the U.S. vs. international machinery sales: North America up 3 percent, but Europe/Australia/Middle East up 27 percent, Asia/Pacific up 35 percent, and Latin America up 18 percent. Caterpillar now gets two-thirds of its sales outside the U.S. Up 4 percent.

Honeywell also beat expectations, and raised its full-year guidance . Stronger growth overseas. Aeorpsace (about 35 percent of sales) up 7 percent, Automation and Control Solutions (also about 35 percent of sales) up 14 percent, Transportation Systems (about 15 percent of sales) up 14 percent, and Specialty Materials (also about 15 percent of sales) up 18 percent. Up 4 percent.


Questions? Comments? tradertalk@cnbc.com

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  Thursday, 17 Apr 2008 | 4:37 PM ET

The Case For Being Bullish

Posted By: Bob Pisani

Futures popped right after the close as Google reported strong numbers ; up 10 percent.

Major indices stable today, despite mixed earnings report. IBM , good, Marriott , ok on strong international sales, but Conway ,Nokia and Pfizer were notable disappointments.

Dow, S&P are now approaching 3-month highs.

What's up with the brokers? Really closing strong here: Lehman up 5 percent, Merrill up 5 percent, Morgan Stanley and Goldman up 2-3 percent.

Seems like a lot of short covering, but the theory is...what? Earnings out, brokers unlikely to get worse? Well, sort of. As one trader in financials noted to me, "earnings have to be real bad, not just in line" to keep short positions on.

That's true, but the case for getting bullish is broader than that. Simply put, here's out the bulls are explaining it to me:

1) The write downs mean anything anymore, the story is old, the numbers are meaningless.

2) Probably one or two more rounds of it but the sentiment doesnt really change that much.

3) They are historically cheap, they have survived the meltdown and had no problems raising outside capital.

The downside to this game, as others have noted, is that if the quarter progresses and business is not getting any better, shorts will go right back on again.


Questions? Comments? tradertalk@cnbc.com

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  Thursday, 17 Apr 2008 | 1:05 PM ET

New ETFs: Keeping Track Of International Exchanges

Posted By: Bob Pisani

The markets might be off to a painful start this year, but new ETFs keep coming out. The latest out just this week is a whole suite of ETFs that track several key international exchanges.

They're called NETS, which stands for Northern Exchange Traded Shares, and they're from Northern Trust, one of the leaders in institutional index management.

Here's a list of the NETS Indexes:

»Read more
  Thursday, 17 Apr 2008 | 9:13 AM ET

Earnings Not Much Help For Markets

Posted By: Bob Pisani

Mixed reports on earnings this morning; IBM is a help, but Pfizer , Continental Airlines , Marriottand Nokia are not.

Merrill Lynch recorded another $9 b in write-downs on mortgage-related assets, leveraged loans and hedges.

The net loss of $1.97. b ($2.20 a share, expectations were for a loss of $1.96), was the third straight quarterly loss. Both equities and fixed income revenues were below expectations. Also announced a 10 percent head count reduction (about 4,000 jobs). CEO Thain is making both cautious and soothing comments on the conference call, saying he is planning for a slower, more difficult next few quarters, but is optimistic about fiscal y ear 2008.

Pfizer 61 cents, a nickel below expectations, also missed on revenues . Sales of big drugs like Lipitor and Celebrex look below expectations. Not a good start for pharmaecutical earnings. Down 4 percent.

Continental Airlines reported a loss, no surprise since jet fuel costs were up over 50 percent, but it was not as bad as analysts had predicted. They are taking more planes out of service and reducing capacity. They were not terribly downbeat, however. Southwest Airlines reported a small gain.

Marriott cut its earnings outlook for 2008. Once again, growth is international. Revenue per available room (REVPAR, the standard metric) grew only 2.3 percent; international REVPAR increased 18.5 percent (these are for company-owned hotels).

United Technologies reported earnings slightly above expectations and reaffirmed its 2008 earnings guidance.

UBS' CEO is sounding optimistic this morning, says he doesn't think they will need to raise more capital, and that signs of improvement are starting to appear, but that it will take several more months to exit from the crises.

Nokia reported earnings about in line with expectations , but noted that average selling prices continue to decline, and they seem to have lost market share. Down 11 percent pre-open.


Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 16 Apr 2008 | 4:58 PM ET

IBM Services: The Real Surprise

Posted By: Bob Pisani

IBM up about 3 percent after the bell to a new multi-year high on earnings that beat expectations.

The surge is not just about the beat -- but how they did it: hardware was flat, as expected (there were fears it would be weaker), software was strong, and services (more than half of revenue) were very strong.

There had been fears about services, since about 25 percent of the revenue from services was from financial firms -- and some worried that the financial firms might have cut back on their use of IBM's services. Didn't happen.

IBM also raised its full-year guidance ; S&P futures up about 5 points on this.


Questions? Comments? tradertalk@cnbc.com

»Read more
  Wednesday, 16 Apr 2008 | 4:25 PM ET

The Top Stocks Sought By Short Sellers This Week

Posted By: Patti Domm

It's not surprising but some retail names are increasingly showing up among the stocks sought by short sellers.

Locatestock.com , which locates stocks for short sellers, says its top stocks sought by shorts this week include Crox , First Marbleheadand retailer DSW .

Also active this week are Lehman, which has been a top five stock for Locatestock for the past month, and Merrill Lynch, which reports earnings Thursday.

The top names have largely been financials, says John Tabacco, ceo of Locatestock.com but its clear retailers are rising to the top.

Here are the top requested stocks last week at Locatestock.com:

1. Lehman Brothers

2. ishares FTSE/Xinhua China 25 index

3. Trina Solar Ltd

4. Lululemon Athletica

5. Blue Nile

»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.

 

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

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