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Feb.02

9:28 AM ET

Monday, 2 Feb 2009

The Weakest Link

Posted By:Bob Pisani

Topics:Barack Obama | Earnings | Investment Strategy | Stock Market

With European bourses down 2 to 3 percent on the first day of February, it's little wonder that European banks are again the weak link, with ING [ING Loading... () ] , UBS [UBS Loading... () ] , HSBC [HBC Loading... () ] and Barclays [BCS Loading... () ] down 5 to 8 percent pre-open.

February has been a relatively weak month in the last decade, down 7 of the last 10 years for the S&P 500. Not that traders follow this much any more; remember December and January used to be the two best months of the year.

Elsewhere:

1) How much has the global slowdown affected toy sales? Mattel [MAT Loading... () ] gets about half its sales outside the United States; those international sales were down 20 percent in the last quarter. Mattel down 16 percent pre-open, as they reported earnings well below expectations ($0.49 vs. $0.72, which includes a $0.13 tax benefit), revenues were also below expectations. Barbie sales down 21 percent, Hot Wheels down 22 percent.

2) What about manufacturing? Industrial automation giant Rockwell Automation [ROK Loading... () ] also gets about half its sales outside the U.S., it's down 20 percent pre-open, citing an "unusual number of customer plant slowdowns" for the relatively weak first quarter earnings of $0.81 ($0.84 was expected by analysts) but more importantly they are revising 2009 guidance downward to $1.55 to $2.25, well below analyst estimates of $3.20.

3) New York Stock Exchange down 9 percent pre-open as everyone on the Street gangs up on exchanges:

a) BMO Capital [BMO Loading... () ] lowers estimates based on exchange rates and lower volumes;

b) KBW [KBW Loading... () ] downgraded the NYSE, citing unfavorable pricing trends, a sustained negative shift in exchange rates, lower volume than anticipated in Europe and potential for market share loss;

c) Goldman put NYSE on the Sell list on currency issues and higher rebates paid to Designated Market Makers (they also put NASDAQ on the Neutral list);

d) Citi [C Loading... () ] lowered earnings estimates based on lower volumes.

4) Obama indicated to Matt Lauer that he wants the Treasury Dept. to develop clear guidelines for financial institutions receiving aid from the government. Without directly supporting a bad bank concept, he did indicate support for the concept of the government supporting banks, with the caveat that they continue to write down bad debt.