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Did Buffett Help 'Sink' Shanghai Index?

Published: Wednesday, 19 Aug 2009 | 9:14 AM ET

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By: Bob Pisani
Reporter

Did Warren Buffett help drop the Shanghai Index? The Shanghai Composite dropped another 4.3 percent overnight and is now down 19.8 percent since hitting its high August 4th.

Oddly, stocks in Shanghai were trading UP in the morning session, when trading resumed in the afternoon (they have a break midday), the index fell apart.

As China Stocks Retreat, Fears Grow About Economic Impact

No explanation was offered for this, but several traders noted that Buffett's editorial in the New York Times appeared in this break, which happened around midnight Eastern Time. His cautious comments may have been a factor in the decline in Asia.

CNBC's Warren Buffett Watch

Regardless, what should we think about an index that drops nearly 70 percent in a year, then rallies 100 percent in the following 9 months, then drops 20 percent in the following 2 weeks? That’s the Shanghai Index.

Elsewhere:

1) Deere [BJ Loading... () ] down 2 percent pre-open. Although they reported earnings well above expectations ($0.99 vs. $0.57 expected), much of the beat was due to a better tax position.

For the current (fourth) quarter, the company noted equipment sales are expected to be down 21 percent vs. prior guidance of down 19 percent.

The earnings call is 10 AM ET.

2) BJ's Wholesale [BJ Loading... () ] Q2 earnings beat estimates ($0.64 vs. $0.62 est.) despite a 5 percent decline in sales, which were hurt by lower fuel prices. However, the warehouse club saw improved gross margins and a 2.9 percent increase in same-store merchandise sales.

The outlook for the full-year is mixed: the company raises earnings guidance but lowers sales guidance as sales in both gasoline and merchandise are seen weaker than previous expectations.

3) Alcoa [AA Loading... () ] is down 4 percent after being downgraded to "neutral" at Goldman Sachs on valuation. Analysts are concerned that the run-up in aluminum prices may be over soon due to "excess aluminum capacity" as inventories remain at "historically high levels."

4) Analog Devices [ADI Loading... () ] is down 4 percent pre-open. The chipmaker beat earnings estimates as it slashed costs. While revenues still topped estimates, gross margins of 54 percent weakened from the prior quarter and disappointed the Street.

Looking ahead, the company sees both revenues and earnings topping the Street's forecasts as CEO Jerald Fishman notes that orders "have remained strong in the first two weeks of August."

5) Bullishness finally dropping a bit: financial newsletter writers were slightly less bullish this week, according to Institutional Investor, dropping to 48.3 percent vs 49.4 percent the prior week, off their highest level since January 2008. Bears dropped to 23.1 percent vs. 21.3 percent last week, up from their lowest since October 2007.