Traders On Bernanke's Hearings: "Nothing Good Will Come From This"
Ben Bernanke's 10 AM ET testimony dominates trader talk this morning, and as one trader observed, "Nothing good will come from this."
Indeed. While many on the Street strongly strongly disagree with the Fed and the Obama administration's willingness to prop up everything from banks to autos to mortgages, very few disagree that Mr. Bernanke stepped in at a critical moment and pulled the U.S. economy out of an even more serious nosedive.
If you doubt this, pull up the clips on what I think is the most memorable moment of the crisis: September 18, 2008, when Mr. Bernanke and Mr. Paulson emerged from a meeting with the Congressional leadership, most of whom, including Rep. Pelosi, looked they had just seen ghosts. Bernanke had clearly scared the living the daylights out of them by laying out the enormity of the crisis.
2) the 7-year auction is the other key event of the day; the 2- and 5-year auctions did well on Tuesday and Wednesday.
3) Earnings. While companies may be beating earnings estimates, much of the earnings upside surprises continues to come from successful cost cutting rather than from stronger sales
a) CKE Restaurants turned in better-than-expected earningsas an effective round of cost cuts helped the fast food company make up for weakness in sales. Hardee's comp store sales were up slightly, but its California-centered Carl's Jr. struggled, turning in a 5 percent decline in same-store sales amid the particularly difficult economic conditions in that state.
b) Shares of Nike fall 5 percent pre-open. While the apparel and athletic shoe maker beat earningsestimates by 7 cents, revenues fell 7 percent and its outlook disappointed.
Excluding currency changes, Nike reported futures orders for delivery between June through November are 5 percent below last year's level, with significant weakness in its Europe, Middle East, and Africa division (down 11 percent).
c) Bed Bath and Beyond is up 5 percent pre-open after beating estimates by 4 cents and guiding inline with estimates for the current quarter and year. The home furnishings superstore saw its same-store sales fall 1.6 percent. The retail chain also managed to cut expenses 2 percent, which helped boost its bottom line.
4) There has been little from home builders to indicate a clear bottom in housing. Lennar reported a loss slightly larger than expected, through revenues were higher than expected.
Orders only declined 19 percent from the same period last year, better than most expected.
CEO Stuart Miller said he was sensing pent-up demand, but that rising unemployment, increased foreclosures, tighter credit standards, and a recent spike in mortgage have "made it difficult to predict when the market will ultimately turn the corner."
5) Tween Brands, which runs the Justice and Limited Too stores, up 20 percent as a Dress Barn subsidiary announced an all-stock merger, where each share of Tween Brands common will exchanged for 0.47 shares of Dress Barn common, about $6.22 per Tween Brands share, a roughly 20 percent premium to the $5.18 close yesterday.
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