Market Insider with Patti Domm Trader Talk with Bob Pisani

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  Thursday, 29 Jan 2009 | 11:38 AM ET

Shrugging Off Bad News?

Posted By: Bob Pisani
Stocks are holding up well today...financials are down but off their lows...major indices down 1-1.4 percent, but also off their lows....is this a surprise? »Read more
  Thursday, 29 Jan 2009 | 9:30 AM ET

Can The Rally Last?

Posted By: Bob Pisani
The four-day rally in the S&P 500, the first since November, is in jeopardy today. »Read more
  Wednesday, 28 Jan 2009 | 4:13 PM ET

Feds Deliver A Promise And A Rally

Posted By: Bob Pisani
A 4-day rally in the S&P 500 and the NASDAQ, the first 4-day rally since the end of November (Dow only up 3 days in a row). The S&P has rallied 5 percent in that period. »Read more
  Wednesday, 28 Jan 2009 | 3:16 PM ET

The Fed Stays Fluid

Posted By: Bob Pisani

The Fed issued a long statement that clearly indicated their policies would be fluid. There was a little bit for everyone in the statement who wanted an aggressive Fed, and some for those who wanted a more conservative Fed.

First, they reminded us rates would stay "exceptionally low...for some time."

Fed opens door to buying Treasuries. The Fed needs to make sure that Treasury yields remain low. To buy some insurance, many traders wanted the Fed to announce they would be buying Treasuries, and while it didn't happen Mr. Lacker dissented, indicating he did want to buy Treasuries.

The Fed wants to make sure that higher borrowing costs don't crowd out private sector access to credit, and while this would be a fairly radical step for the Fed they did open the door a bit more by saying they were "prepared" to purchase longer-term Treasuries (at the prior meeting, they said they were merely "evaluating" the benefits).

Why does the Fed want to keep rates low?

Aside from the inflation concerns, remember they are aggressively buying mortgage backed securities. That investment could be in trouble if longer term interest rates head higher.

More buying of mortgages?

Speaking of buying mortgages, stock traders believe that the Fed program to purchase agencies and mortgage-backed securities has been a major factor in lowering mortgage rates, so they welcomed the Fed's statement that they "stand ready to expand the quantity of such purchases and the duration of the purchase program as conditions warrant."

TALF coming, but no expansion indicated. The Fed's upcoming $200 billion Term Asset-Backed Securities Loan Facility (TALF) will lend money to purchasers of asset-backed securities, money that will funnel through to consumers via credit card loans, car loans and leases, student loans, and small business loans. There was some discussion that the Fed could expand the program to include other areas of lending, including commercial mortgages, but they passed on this opportunity.

All in all, this was a long, fluid statement, indicating the Fed would change programs as conditions warrant. While this creates uncertainty about the size and extent of future programs, the Fed obviously feels this is the only safe course.

They are clearly taking a page from Keynes’ famous dictum, "When the facts change, I change my opinion. What, sir, do you do?"

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Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 28 Jan 2009 | 9:22 AM ET

Futures Hold On To Big Gains

Posted By: Bob Pisani

Futures have been holding impressive gains overnight, on top of a three-day gain, as markets are expecting news on several fronts:

1) First and foremost, the President is expected to unveil details of his plan to buy toxic bank assets. The plan to buy toxic assets is what is really moving markets, particularly financials.

U.S. banks are strong as well, with B of A up 19 percent, Citi up 15 percent, PNC up 12 percent.

European banks are also very strong, with Lloyds up 40 percent, Barclays up 21 percent as the threat of nationalization of U.K. banks has eased for the moment. Deutsche Bank up 19 percent, HSBC up 10 percent.

2) The House is getting set to vote on President Obama's $825 billion economic stimulus plan

3) The Federal Open Market Committee may not be able to lower rates, but they can broaden the types of securities they might be buying. Not just longer-term Treasuries, but even more quantities of mortgage-backed securities, which the Street believes has been successful in reducing mortgage rates. The Street is also looking for more details of the Term Asset-Backed Securities Loan Facility (TALF), which will backstop securities buying commercial loans.

Elsewhere:

a) Wells Fargo up 21 percent as they reported a loss of $0.79, versus expectations of a gain of $0.33, but there is large hits for a credit reserve build and market disruption losses. The earnings are not as important at this point; what is important is the balance sheet, and they are trying to improve that by taking a significant hit ($5.6 billion) for credit reserve builds.

They have no plans to ask for more TARP money. They did declare their regular dividend.

Wells made positive comments about its recently acquired Wachovia division, saying consumer and commercial depositors returned to Wachovia in the fourth quarter.

b) Positive earnings from Yahoo (up 6 percent) and SAP (up 10 percent) were also helpful.

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Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 27 Jan 2009 | 4:35 PM ET

GE's Ratings Still In Doubt

Posted By: Bob Pisani

Our parent company, General Electric , down $0.60 after the close (about 5 percent), as Moody's has announced they have placed GE and GE Capital's long-term debt ratings on review for possible downgrade.

For GE Capital, Moody's said the concern is that "that deepening global economic weakness could further compromise GECS' asset quality, potentially jeopardizing its ability to meet earnings objectives while also maintaining high earnings quality."

    • Citigroup Names Interim CEO of Citi Holdings Unit

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Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 27 Jan 2009 | 3:18 PM ET

"Banking" On A Rally?

Posted By: Bob Pisani

It's happening again: banks have sold into earnings season, and are rallying now that it is mostly over.

While the S&P has posted healthy gains of about 5 percent in the past 5 trading sessions, the Bank Index is up about 12 percent in the same period.

Why?

Because traders have found a successful trading pattern: buy banks as their earnings reports are ending, and sell them a few weeks later.

For the past five quarters, banks have followed this pattern.

Two important points:

1) Rallies in bank stocks post-earnings have been notable but short-lived. Peak to trough rallies have lasted anywhere from a few days (in the case of Oct. 2008) to two weeks (in the case of the rally in January 2008) to two months (in the case of the July-Sept. 2008 rally), but not longer.

2) In all cases, subsequent losses have exceeded gains. In other words, it has not been profitable to hold bank stocks for any more than a few weeks after earnings season is over; their rise post-earnings is invariably followed by a fall.

Eventually, this trade will play out. Bank stocks will stop declining a few weeks after their earnings come out, and this trade will no longer be profitable.

But I'll bet we are not there yet; not for this quarter.

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Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 27 Jan 2009 | 12:28 PM ET

Newest Concern: Pension Under-Funding

Posted By: Bob Pisani

Pension under-funding is becoming the latest problem for corporations.

In the last couple days, Hershey , U.S. Steel , Delta , and Canadian Pacific have noted that their company pensions were underfunded.

This means more cash will have to be put into them in 2009 (barring an amazing turnaround in the markets), which will be an additional hit to earnings.

It's not a minor amount, either. For example, in the case of Hershey, pension expenses might cost $70 million in 2009, a hit of $0.20 per share to earnings (they are expected to earn $1.90).

There's no doubt pension fund managers have been stunned by the rapid decline in the value of assets under management.

The question is, what do they do? Remember, they have to match their assets with liabilities.

Aside from getting more cash from their parent companies, they have to decide whether they want to:

1) Increase their investment risk for higher return, or

2) Get more conservative to preserve assets.

Judging by the move to cash, many have clearly opted for option 2. Either way, the implication is for a shift in asset classes and among asset managers.

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Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 27 Jan 2009 | 10:36 AM ET

Is It Time To Put The January "Barometer" On Ice?

Posted By: Bob Pisani

There was an article in the WSJ yesterday on the January Barometer, noting that when the S&P 500 is down for the month of January it has, on average, fallen another 2.4% for the remaining 11 months of the year.

But market uber-nerd Laszlo Birinyi notes that the article fails to mention that while 11 out of the 22 down

Januaries had an average yearly return of minus 14.05 percent, the other 11 occurances resulted in a positive average of 9.22 percent.

Heads or tails?

In other words, don't put too much in the January Barometer.

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Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 27 Jan 2009 | 9:30 AM ET

Hope In The Numbers

Posted By: Bob Pisani

After yesterday's depressing results, it's pleasant to see a number of companies beat or coming in in-line with expectations; even guidance is not horrible today.

1) Dupont posted a loss of $0.28, worse than estimates of a loss of $0.24, with an overall sales decline of 17 percent. As expected, the Performance Materials division, as well as the Coatings division had big declines (30 and 21 percent declines, respectively), while the Agriculture division saw modest declines of only 2 percent. Agriculture is now the largest division by sales (23 percent).

Dupont is a good bellweather to watch; due to its exposure to autos, construction and parts of the consumer sector like paints its profits and losses usually closely correspond with GDP.

You could drive a truck through the 2009 guidance, but at least they gave it: $2.00-$2.50 (down from $2.25-$2.75), consensus estimate is $2.19. Company is concerned about weak vehicle production (down 28 percent in Q1), concerns about higher raw material costs (!), and continuing lower demand.

2) American Express up 5 percent, was roughly in line with expectations ($0.21 vs. $0.22, though the gain included some legal settlements); most importantly, card spending was down 9.6 percent and credit quality continued to deteriorate. Several brokerages cut their price target.

3) U.S. Steel up 7 percent pre-open on a huge beat: $2.00 vs. $0.71 expected. No guidance, but noted that flat rolled and tubular steel would be down "substantially" in the first quarter.

4) Office REIT SL Green up 10 percent, reported earnings (funds from operations) roughly in line with expectations; surprisingly, averge occupancy rates for its Manhattan properties was still high at 96.7 percent.

5) Zions Bancorp had a bigger loss than expected, including a huge provision for goodwill impairment, as well as a large provision for loan losses. Like many regional banks, there is uncertainty about how many additional losses there will be and whether or not they are adequately marking down the value of remaining assets.

    • Citi Has No Plans to Take Delivery Of Any New Aircraft

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Questions? Comments? tradertalk@cnbc.com

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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.

 

  • Bob Pisani

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

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