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This Season's Must Have: Guidance From The Retailers

January retail sales are tomorrow, but the big event will be lowered earnings guidance.

Already, Costco reported same store sales down 2 percent, and Macy's has said sales would be down 6 to 8 percent.

While January sales are important, we are really looking for guidance on the quarter and the first half of the year.

Remember, retailers are the last group to report earnings (most are on January-ending quarters). The pattern for several other sectors (financials and industrials) has been to notably lower earnings expectations for the first half, while keeping estimates for the second half relatively intact.

I expect the same pattern from retailers tomorrow.

Remember the bear position: the market will move down an additional 10 to 25 percent in the next one to three months when the Street realizes that the second half earnings estimates are way off. That will be the capitulation bottom. The most bearish of the bears argue for a bottom in S&P 500 at 600-650 (currently 832).

The pattern: discounters and drug stores hold up, big deterioration everywhere else.

Jan. retail sales (estimates)

  • Wal-Mart up 1.1%
  • Walgreen up 1.3%
  • Saks down 17.7%
  • Nordstrom down 13.9%
  • JC Penney down 11.7%
  • Abercrombie down 30%

Source: Thomson

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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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