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Market Insider with Patti Domm Trader Talk with Bob Pisani


  Friday, 9 Jan 2009 | 1:58 PM ET

So, What's Next? What Moves Stocks Now?

Posted By: Bob Pisani

Two things:

1) More detail on the stimulus package—it's unlikely that today's jobs report will result in a big increase in the stimulus package, but there is still a lot of detail that will materialize in the next two weeks. Expect some movement in infrastructure and healthcare stocks.

2) Fourth quarter earnings and guidance. Unfortunately, we are continuing to see earnings come down for the fourth quarter. For example, estimates continue to drop for retailers, energy, and material stocks.

And we are also seeing numbers come down for the first quarter.

Alcoa kicks off earnings season with its report on Monday.

You can argue that sell-side analyst estimates are notoriously bad—and late—and you would be right. But the Street still watches the trend, and the trend is heavy cutting of estimates. Expect that when the analysts finally start erring on the other side (i.e. they are cutting TOO MUCH) that will be widely noted as a bottom.

Elsewhere: It never dies. U.S. Rep. Gary Ackerman (D-NY), a Senior Member of the House Financial Services Committee, today reintroduced legislation that would reinstate the uptick rule, which required a stock to increase in price before a short sale could be executed.

    • Obama Uses Jobs Report to Push for Stimulus Plan



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  Friday, 9 Jan 2009 | 9:20 AM ET

Jobs And The Stimulus Package

Posted By: Bob Pisani

524,000 jobs lost in December is pretty terrible, in line with estimates, but it is well below the whisper numbers of 600-700,000 that many were expecting. However, there were notable revisions in October (from a loss of 320,000 to a loss of 423,000) and November (from a loss of 533,000 to a loss of 584,000).

Futures, after jumping around initially, are now up about 5 points from the pre-jobs report level.

Despite the poor numbers, it is doubtful this will dramatically increase the size of the stimulus package.


1) Coach lowered its guidance for the recently ended quarter, citing lower traffic. "Despite the heavily promotional environment, we maintained our retail prices, protecting our brand proposition." In other words, they didn't sell as much because they didn't cut prices. This was the "aspirational brand" strategy that Abercrombie also pursued, and their sales also suffered. Coach joined a growing list of companies that has said they will stop giving guidance.

2) Chevron said earnings would be "significantly lower than the third quarter" due to lower energy prices, which has hurt its exploration and production business. Here's the rub: third quarter earnings were $3.85, while analyst estimates for the fourth quarter are $1.78, so isn't that significantly lower? Chevron is trading up.

3) KB Home's fourth quarter loss was less than previous quarters, the number of homes in backlog decreased and there were fewer writedowns. That’s the good news. However, the cancellation rate is still high.

4) The German government is taking a 25 percent stake in Commerzbank in exchange for an injection of $13.68 billion in fresh capital. It comes at a heavy price: the bank will issue 295 million ordinary shares, so it is highly dilutive.

  • US Payrolls Drop 524,000; Unemployment Rate at 7.2%
  • KB Home Reports Loss, Says Market Could Worsen

5) Circuit City says they are in discussion with two parties who are considering providing financing for them to continue as a going concern. The company is optimistic that a transaction can be successfully finalized.



Questions? Comments? tradertalk@cnbc.com

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  Thursday, 8 Jan 2009 | 4:14 PM ET

Traders Ask, "What Urgency?"

Posted By: Bob Pisani

Despite tremendous fear that the nonfarm payroll report would be a complete disaster tomorrow, traders acted like there was little urgency. Volume was light, volatility was low and with the exception of one sector (retail) all S&P sectors were up or down less than one percent.

Two factors helped stocks midday: a successful ten year Treasury auction, and a report that Citigroup is supporting a law that would allow bankruptcy courts to alter the terms of mortgages

The S&P 500 is up 0.7 percent for the first five days of the year—this is a positive, since the first five days indicator is considered an early warning system.

What's up with the lack of panic over the jobs report? Traders were full of surprisingly optimistic commentary, which went like this:

1) There has been lots of bad news this week: ADP report and Wal-Mart in particular, both notably worse than expected, yet despite this the S&P is only down 3 percent for the week.

2) This decline, after an 8 percent rally in the last 5 days of last year and the first 2 of the new, is pretty modest.

3) the expected stimulus package has been an important factor in stabilizing the markets in the past few weeks.

4) The markets have not only priced in bad news, it has priced in some news even worse than expected.

5) To go down BIG (back to the November lows and beyond) a couple things will have to happen:

a) We are going to need REALLY bad news for several weeks, and

b) There needs to be really poor execution of the stimulus package--less stimulus than expected, poor mix, etc.

These events may happen (indeed, it is the core belief of the bear argument that the news flow will be shockingly bad for months on end--the Nouriel Roubini Armageddon argument).

But more than a few traders think the risk is increasingly to the upside, not the downside.



Questions? Comments? tradertalk@cnbc.com

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  Thursday, 8 Jan 2009 | 11:01 AM ET

President-Elect Obama's Dire Warnings

Posted By: Bob Pisani

President-elect Obama's speech on the economy this morning is designed to hammer one point home: if the government does not act aggressively, the recession could linger for years.

His speech is peppered with dire warnings.

If we do not act, the President-elect says "We could lose a generation of potential and promise, as more young Americans are forced to forgo dreams of college or the chance to train for jobs of the future."

While admitting the cost of the plan will be considerable, doing too little or nothing at all is not an option, because the risk of inaction is too high.

Here he confronts critics of government spending head-on: "at this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe."

He also touches on familiar themes: getting credit flowing, addressing the foreclosure crisis, preventing the further failure of financial institutions, and reform of the financial regulatory system.

But the main thrust of his speech is to convince Congress--and the American people--that we need to act immediately.



Questions? Comments? tradertalk@cnbc.com

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  Thursday, 8 Jan 2009 | 9:12 AM ET

Wal-Mart's Big "Surprise"

Posted By: Bob Pisani

Futures dropped 5 points on disappointing guidance from Wal-Mart .

We were expecting a poor December retail sales report, and for the most part it did not disappoint.

The biggest surprise was Wal-Mart, which reported a disappointing 1.7 percent increase in December same-store sales, and gave fourth quarter guidance of $0.91-$0.94 (prior view was $1.03-$1.07).

Wal-Mart down 8 percent pre-open.

Besides Wal-Mart, American Eagle , Gap , and Abercrombie also cut guidance. Abercrombie down 8 percent pre-open.

One bright spot: Target was down 4.1 percent, much better than the decline of 9.1 percent expected.

In apparel:

Deep discounting, as expected hurt margins at Limited , which now projects fourth quarter earnings between $0.55 and $0.70 (analyst estimate is $0.87).

Abercrombie, which reported a sales decline of 24 percent, about in line with expectations, said fourth quarter earnings would be "significantly below" the $1.00 to $1.05 previous guidance.

Gap reported sales below expectations and guided lower (2008 diluted EPS $1.27 to $1.30 from previous guidance of $1.30 to $1.35).

Department stores had sales that were mostly OK, but discounting hurt them:

Nordstrom's sales were better than expected, but because of discounting they too are experiencing margin pressure, so earnings will be below expectations.

Macy's sales were better than expected.

The outlier was Saks : a big miss, with comp store sales down 19.8 percent, twice the decline that was expected. Because of heavy promotions, they are expecting a "significant" decrease in gross margins.


1) The Bank of England cut rates 50 basis points to 1.5 percent (the lowest since the central bank was founded in 1694--now THAT is a record!).

2) Volume, or lack thereof. Yesterday's 3 percent decline occurred on volume that was lighter than any other 3 percent decline in the past 4 months.

3) Cardinal Health lowered its full year guidance (they are in their second quarter) on concerns over hospital spending.

    • Wal-Mart Warns on Profit, Sales Disappoint
    • Bank of England Cuts Rates to Record Low of 1.5%



Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 7 Jan 2009 | 4:17 PM ET

Reality Check Part Two

Posted By: Bob Pisani

Call this one Reality Check Part Two: a weaker than expected ADP report, along with disappointing earnings guidance from Time Warner and Intel, a big restructuring from Alcoa , and an 11 percent pullback in oil which pulled commodities and commodity stocks down all weighed on the markets today.

It was a broad market pullback, with 5 stocks declining for each 1 advancing, but it was the percentage declines that were more important: most stocks were down 3 to 7 percent.

While defensive names like healthcare and consumer stocks outperformed, they too experienced drops averaging 1 to 3 percent.

Up next: December retail sales out tomorrow, and analysts like Ken Perkins are anticipating poor numbers, characterized by:

1) Deep discounting, which will not me able to overcome the poor economy

2) Margin pressure because deep discounting hurt the bottom line: retail earnings excluding Wal-Mart are expected to drop 27.5 percent (!) in the fourth quarter, according to Retailmetrics.

3) Weak gift card purchases on solvency concerns and a desire to directly buy deeply discounted merchandise

4) Weak online sales, down 4 percent, according to comScore.

5) Poor weather in the form of major storms the final weekend before Christmas.

With the exception of drug stores, which will post modest single-digit gains, every category will be down.

Teen retailers will likely post the biggest overall losses (down 10.9 percent, acc. to Thomson estimates), with only Hot Topic and the Buckle are expected to post modest gains. Abercrombie , in particular, will be hit hard, with losses of 23.5 percent expected. Abercrombie, remember, refused to engage in the deep discounting, hoping to keep the "aspirational theme" of their brands. They have paid a price, though margins may be better than others.

Apparel (down 8.2 percent) will probably post the second-biggest decline in sales, with most (Gap , TJX , Limited) expected to post high single-digit declines.

Department stores (down 7.7 percent) will be almost as bad, with some (JC Penney, Nordstrom and Saks) expected to post double-digit declines.

Even discounters are having a tough time. Wal-Mart is expected to post a 2.8 percent increase (Thomson estimates) in same store sales, but Costco and Target are expected to be down 3.7 and 9.1 percent, respectively.

So the numbers will be ugly, but that is already in the market. The question is whether they will be significantly worse than the ugly numbers expected.

Finally, on Friday we get nonfarm payrolls. One trader noted to me that on the last 6 Thursdays prior to the non-farm payroll report, the S&P 500 was down 21.00, down 53.50, down 44.00, down 38.60, down 17.60 and down 23.40.



Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 7 Jan 2009 | 12:03 PM ET

So Is This It For Our Rally?

Posted By: Bob Pisani

The S&P 500 rose in 6 of the last 8 trading sessions for a gain of 8.2 percent. But today's news, with several companies indicating that earnings will be even worse than lowered expectations, has some of the hallmarks of at least a short-term trading top.

Consider that bullishness has been increasing recently:

1) $10 billion has flowed into equity funds in the last four days

2) For the first time since August, more financial newsletter writers are bullish than bearish.

Money often goes into the markets during tops of some type, and high levels of bullishness have also often corresponded with market tops.

Consider also that the major problems of the last few months have not gone away:

1) Earnings guidance remains poor and today is worse than even lowered expectations

2) Corporate/insider buying very low

3) Withholding taxes way down

4) Little new money going into market

One important point about today's trading: volume is not picking up. In other words, there has not—as of midday—been any sign that selling pressure is increasing. Rather, it is an absence of buying interest that is causing the market to drop—so far.

    • Obama Pledges Entitlement Reform to Curb Spending



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  Wednesday, 7 Jan 2009 | 9:24 AM ET

Today's Reality Check

Posted By: Bob Pisani

Here's the reality check.

1) Futures dropped about 5 points as the ADP said 693,000 private sector jobs were lost in December, much greater than the expected loss of 515,000. However, there was a change in methodology that was designed to close the gap between the ADP report and the nonfarm payroll report.

2) After the close yesterday Alcoa announced a restructuring plan that involves another reduction in aluminum output, a reduction in the workforce by 13 percent (13,500 jobs), a 50 percent reduction in capital expenditures, and the sale of some non-core downstream businesses. Down 5 percent pre-open.

The good news is that the restructuring will result in lower costs and probably some incremental improvement in earnings in 2009 and 2010. The question is whether the cuts will be sufficient in light of very low aluminum prices. If not, they will need to cut capacity later in the year.

Most commodity stocks are trading down roughly 3 percent pre-open.

3) Oppenheimer's Meredith Whitney, in what has become a monthly series of downbeat notes, says that U.S. banks will need to raise new capital in 2009. She says there will be more credit-rating downgrades due to losses in mortgage-backed securities.

4) In another flameout, Satyam Computer Services down almost 90 percent (!) pre-open as the Chairman of the Indian computer maker has resigned after admitting he had falsely inflated profits for years. How much? Operating margin for the three months ending September 30th was reported at 24 percent; it was actually 3 percent. Indian financial institutions are trading down: ICICI Bank down nearly 11 percent, HDFC Bank down nearly 8 percent.


a) Despite the downbeat news, there's no doubt that the Street has become more bullish in the past two weeks. Today, Investors Intelligence notes that bulls are outnumbering bears for the first time since Aug 20th; in fact bullishness is at its highest level since June.

b) On the earnings front, both Family Dollar and Monsanto reported earnings above expectations; Monsanto raised its full year guidance (they have just finished their first quarter). Family Dollar up 10 percent, Monsanto up 8 percent.

c) Dow Chemical said it may miss next week's deadline to seal the takeover of Rohm & Haas so it can raise cash without taking on too much debt. The cost of the acquisition increases by $100 million for each month delay.

    • Dec. Job Losses at 673,000, Worse Than Thought



CNBC's Names in the News:

Time Warner



Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 6 Jan 2009 | 4:18 PM ET

Some More Positive Signs For Stocks

Posted By: Bob Pisani

1) Modest, multi-month breakouts in energy, industrials, materials, techs. Don't be fooled by the low volume and lack of wild trading ranges. Lower volatility, and a shift into economically sensitive stocks and out of defensive names, are all positive signs. S&P 500 up 6 of the last 8 trading sessions.

2) Mortgage rates below 5% as the Treasury continues to buy mortgage-backed securities.

3) Corporate bond demand picks up. GE Capital successfully floated $10 billion in FDIC-backed bonds--the biggest deal since the FDIC-backed program began in November. More offerings expected from Devon ,Brown Forman , Tyco, and others.

4) Reflation signs--a successful TIPS auction, rising commodity prices all signs that some believe modest reflation is on the horizon.

And...a reality check. Ken Lewis at Bank of America telling employees he expects final results for 2008 to be below expectations, according to the WSJ.

But hold on, the Street has also been taking down expectations. Today, RBC Capital said that banks would bottom in 2009, but not before banks see additional problems with commercial and industrial loans. Still, non-performing assets should peak at the end of 2009 or beginning of 2010. They also expect additional pressure to cut or eliminate dividends.

Yesterday, Mike Mayo at Deutsche Bank took down 2009 and 2010 estimates for JP Morgan .



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  Tuesday, 6 Jan 2009 | 2:08 PM ET

Four Positive Signs for Stocks

Posted By: Bob Pisani

Four positive signs for stocks:

1) Stocks remain in an uptrend, with small, multi-month breakouts in energy, materials, and techs.

2) More bullish strategists. Several strategists — including Pequot's Byron Wien and BlackRock's Bob Doll — have said stocks will be higher this year, though most others remain bearish.

  • CNBC Pros Say: Buck Up — And Buy Upgraded Stocks!

3) Corporate bond issuance picks up: GE Capital (a unit of General Electric , as is CNBC) successfully priced $10 billion in FDIC-guaranteed debt last night, the largest offering of government-guaranteed debt since the program began in November, and other companies including Devon Energy are looking to price soon;

4) Time to start a "trough list?" Tony Crescenzi at Miller Tabak has spoken of the need to look for signs of troughing in key industries as an early warning sign that the economy is beginning to turn:

1) steel production increased last week for the first time in 20 weeks, according to new data from the American Iron and Steel Institute.

2) auto production is likely to increase in January as a result of government support, which could help create a trough in industrial production.

Right now, the list is pretty thin, but look for it to grow in the coming months.



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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