Market Insider with Patti Domm Trader Talk with Bob Pisani

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  Thursday, 22 Jan 2009 | 5:46 PM ET

Cut-Rate Houses And Cars!

Posted By: Bob Pisani

Yesterday Toll Brothers said they would offer 3.99 percent 30-year mortgages, a full 1.25 points below the current rate. Now Chrysler is expected to announce a new round of incentives: employee pricing, zero-percent financing and special rebate offers, according to a spokesperson.

Did Thain know he was out at B of A ? You would think so, but how to explain that Thain bought 84,600 shares of B of A yesterday at $5.71? Hmm.

Google : I like the numbers, but... It's hard to believe them. Companies are slashing their advertising budgets but Google's sales are up?

Traders tell me that online advertising is usually the last to get cut, and that, I am told, is what is saving Google. For the moment.

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  Thursday, 22 Jan 2009 | 3:39 PM ET

Stimulus Bill Gets Real

Posted By: Bob Pisani

The stimulus bill is getting real, particularly the infrastructure component.

Now that the House Appropriations Committee has voted a big chunk of the stimulus ($358 billion) out of Committee and Ways and Means is marking up their part of the stimulus, traders are again taking a look at what effect stimulus will have on select stocks.

The big issue is that most believe the money can't get spent any time soon.

Congress is trying to rectify this. There is an effort to get funds to states--who disburse the money to contractors--ASAP. There is talk about getting the money disbursed to the states within 7 days of signing the bill, then requiring the states to disburse a significant portion of the money (say, 50 percent) within 120 days.

This helps clarify when money will be spent, and so far clarification has been in short supply.

That's why the effects of the stimulus plan on stocks have been modest at best. Looking at infrastructure, big machinery stocks like Caterpillar have not outperformed because there have been concerns that:

1) The size of the stimulus has been too small, and

2) The rapid global slowdown has trumped any stimulus package

Some engineering stocks have outperformed, particularly those, like Aecom, that have significant government contracts.

(since November 1)

AECOM Technology +43%

Jacobs Engineering +8%

Fluor +1%

S&P 500 -14%

Stimulus is here! Let the debate on stocks begin.

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  Thursday, 22 Jan 2009 | 9:48 AM ET

Trading And Thriving In This Topsy-Turvy World

Posted By: Bob Pisani

Housing starts and permits were well below expectations, but in the topsy-turvy world today many traders believe that the lower the starts and permits the better, since it means less inventory that needs to be worked off.

The stimulus package is getting more real.

The House Appropriations Committee made a big down-payment on the stimulus package, approving $358 billion in spending, much of it on infrastructure, but also for more police and even for expanding high-speed Internet services. The panel approved an amendment requiring U.S.-made steel be used in construction projects. The House Ways and Means Committee will meet today to consider the tax part of the stimulus bill.

While there is poor commentary from Nokia and Potash , and we have had generally poor commentary from financials, we have had good reports from Apple and IBM .

1) Nokia's down 10 percent pre-open, results were below expectations and gave a poor outlook, saying the global mobile market would decline by 10 percent compared to 2008.

2) Potash reported better than expected earnings but guidance of $0.70-$1.00 for the first quarter is well below expectations of $1.94. They are expecting a much stronger second half because they expect farmers who are delaying purchases to wait for lower prices to order then, so their full year guidance of $10-$12 for 2009 is only a bit below Street expectations of $12.21.

3) Burlington Northern reported earnings a tad above expectations but noted volumes have fallen off.

4) Taiwan Semiconductor , one of the world's biggest chip foundry said overall semiconductor sales could decline 30 percent in 2009 and they could post their first quarterly loss since 1990.

5) In financials, Keycorp and Fifth Third continued the usual trend of boosting provisions for credit losses.

5) United Health came in in-line with expectations, and affirmed full year guidance.

6) Toll Brothers is now offering a 3.99% 30 year fixed rate mortgage for loans of $417,000 or less for those who put down a minimum of 20% and have a FICO score of 720 or higher.

That's important, because average 30-year mortgage rates jumped 0.35 percentage points last week to 5.24 percent. So a $300,000 mortgage at the current rate of 5.25 percent: the monthly payment is $1,657. At 3.99 percent, that $300,000 mortgage is $1,431, a differential of $226, a yearly savings of $2,712. That is significant. Look for more creative ideas like this got get home buying going.

7) Jamie Dimon joined Ken Lewis in buying stock in his company. JP Morgan announced after the close that CEO Jamie Dimon says he bought 500,000 shares of JP Morgan last Friday at 22.93--close to where the stock closed yesterday at $22.63.

    • Microsoft Profit Misses, To Cut Up to 5,000 Jobs

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  Wednesday, 21 Jan 2009 | 4:32 PM ET

Toll's Big Discount & Jamie Dimon's Big Stake

Posted By: Bob Pisani

Buy our house, get a cheap mortgage.

After the close, Dow Jones is reporting that home builder Toll Brothers announced that they were offering a 30-year fixed rate mortgage for 3.99 percent, a full percentage point below the current rate.

Is that important? Yes.

Take a $300,000 mortgage at the current rate of 5 percent: the monthly payment is $1,610. At 3.99 percent, that $300,000 mortgage is $1,431, a differential of $179, a yearly savings of $2,148.

That is significant. Look for more creative ideas like this got get home buying going.

JP Morgan trading up 3 percent after the close as CEO Jamie Dimon says he bought 500,000 shares of JP Morgan recently.

Move over, Ken Lewis .

  • BofA Stock Soars After CEO Makes Big Share Purchase

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  Wednesday, 21 Jan 2009 | 4:11 PM ET

Finally, An Oversold Bounce

Posted By: Bob Pisani

Predictably, it was led by financials. The Bank Index rallied 12 percent after dropping 19.7 percent yesterday.

Bank of America rallied nearly 10 percent at 3 PM on disclosure that CEO bought 200,000 additional shares recently, along with five other directors, for a total of 513,000 shares.

How crazy has trading in financials been? Citi up 24 percent after being down 20 percent yesterday; JP Morgan up 24 percent after being down 21 percent yesterday; Morgan Stanley up 27 percent after being down 16 percent yesterday.

Crazy.

PNC generated some talk by saying they would not ask for more TARP money (they have already received $7.6 billion), that they don't expect to issue additional common shares; and they expect to pay their full dividend of $0.66. Problem is, the Street believes most banks (including PNC) will have to raise more capital and will be forced to cut their dividends, regardless of what they say now.

Techs had a great day on IBM's positive earnings and guidance. IBM was one-third of the Dow's gains today, up 11.5 percent, the best one day gain since January 2001.

Commodity stocks like coal, copper, and steel names were up 4 to 6 percent, and while they have moved mostly sideways since November, there have been many intraday trading opportunities, including today.

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  Wednesday, 21 Jan 2009 | 2:33 PM ET

More Swings On The Street And No One Blinks

Posted By: Bob Pisani

The markets have stabilized as bank stocks have stabilized.

Of some help is PNC , which is generating a few raised eyebrows on trading desks. Recall they dropped 41 percent yesterday and is up 21 percent today (no one even blinks at these price swings any more).

They said:

1) They don't expect to ask for more TARP money (they have already received $7.6 billion);

2) They don't expect to issue additional common shares; and

3) They expect to pay their full dividend of $0.66 (Lawrence Summers' letters be damned!).

The talk is that this is the start of a trend: that any bank that has anywhere near a decent capital position will turn down TARP money in the future.

The problem is that the Street believes most banks (including PNC) will have to raise more capital and will be forced to cut their dividends, regardless of what they say at this moment.

PNC also announced it expects to report a loss for Q4 due to integration costs associated with the National City acquisition, but excluding that they are expecting to report a meaningful profit but still below company expectations.

This sounds like good news, but the bottom line is that credit quality trends are continuing to deteriorate.

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  Wednesday, 21 Jan 2009 | 12:35 PM ET

Deconstructing The Weakness In Constructions

Posted By: Bob Pisani

The S&P and the Dow are moving in lock-step with the large swings in bank stocks this morning.

Bank stocks started the day nicely to the upside, but as they started selling off right after 10 AM ET (the Bank Index dropped almost 5 percent in a little more than a half-hour) the S&P quickly moved down, though not as much. As bank stocks bottomed out just prior to 11 AM ET, the S&P bottomed as well.

Elsewhere, the weakness in the construction industry is clearly showing up in fourth quarter earnings reports.

Look at United Technologies : orders at the Otis Elevator division declined 14 percent, and Carrier's commercial HVAC (heating, ventilation, air conditioning) orders declined 7 percent.

Despite the weakness, earnings were roughly in line with expectations, and they reaffirmed 2009 guidance of $4.65 to $5.15, though they acknowledged "pressure" on the high end of guidance. They are looking to aggressively cut costs.

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  Wednesday, 21 Jan 2009 | 9:25 AM ET

Away From The Financials - Some Hope

Posted By: Bob Pisani

While guidance from financials is generally downbeat again, there are a few outliers reporting good results outside of the banks.

1) State Street may have been a disaster yesterday, but rival Northern Trust is trading up 10 percent as they reported earnings above expectations.

2) United Technologies put in a respectable quarter, with earnings roughly in line with expectations, and reaffirmed 2009 guidance of $4.65 to $5.15.

3) IBM up 4 percent on strong earnings, guidance. IBM pleasantly surprised on earnings and guidance. Fourth quarter earnings of $3.03 was in line with estimates, and more importantly 2009 guidance of "at least" $9.20 a share was well above consensus of $8.75.

For the fourth quarter, Systems and Technology (hardware) revenue was down 20 percent, but software was up 3 percent and the all-important services (more than half of revenues) sector down 4 percent in both Global Services and Global Technology Services.

4) Coach, which had pre-announced disappointing earnings, came in in-line with (reduced) expectations. Margins were lower due to deeper promotions, and North American comparable store sales declined 13.2 percent. They are lowering the number of new store openings. No guidance from the company, but they had already said they would not be providing guidance.

5) US Bancorp reported earnings just shy of consensus ($0.15 vs. $0.18 consensus). The bad news is that like everyone else they are boosting credit reserves and write down more investments. The good news is that deposits--which are desperately needed--grew nearly 6 percent, excluding acquisitions.

6) Our parent General Electric down another 4 percent as Goldman, UBS and Oppenheimer all had comments out. GE will be reporting on Friday.

Goldman said GE is already discounting substantial bad news, reflected in its bonds trading (as if the AAA credit rating will be cut) and its options pricing implying a 50 percent dividend cut in 2010. Also, it is now widely understood that 4Q EPS quality will be low, Goldman says.

UBS said 2009 expectations are too high, that reserves are too low and that 2009 credit losses will exceed their previous guidance.

Oppenheimer also noted the concerns over the credit rating and a potential dividend cut, and also anticipates pressure on 2009 consensus of $1.38.

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  Tuesday, 20 Jan 2009 | 4:50 PM ET

IBM's Surprise

Posted By: Bob Pisani

IBM up 4 percent after the bell on strong earnings, guidance.

IBM pleasantly surprised on earnings and guidance. Fourth quarter earnings of $3.03 was in line with estimates, and more importantly 2009 guidance of "at least" $9.20 a share was well above consensus of $8.75.

For the fourth quarter, Systems and Technology (hardware) revenue was down 20 percent, but software was up 3 percent and the all-important services (more than half of revenues) sector down 4 percent in both Global Services and Global Technology Services.

    • Markets Have Record Slide For Obama Inauguration

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  Tuesday, 20 Jan 2009 | 4:08 PM ET

One Very Clear Market Message

Posted By: Bob Pisani

The message of the markets has been clear since the open: without stability in financials it will be difficult for the broad market to stabilize.

We are again on the verge of a 90 percent downside day, the second since last Wednesday, which is when the Bank Index broke to new lows.

But the weakness was fairly broad-based, with 6 percent declines in many retailers, 3 to 6 percent declines in many commodity stocks, and industrials down 4 to 6 percent as well.

Never mind that financials are now less than 10 percent of the S&P 500 (tech, the largest sector once again, is 16 percent), or that financials are now only the sixth-largest component of the S&P.

The core of the concern is that current efforts to stabilize financials by injecting capital have not worked.

Critics of the current approach point out that we have advanced Citi $45 billion, but it now has a market cap of $16 billion due to worries about continuing massive losses.

Since the losses are due to bad assets, the best way to stem the losses is to either wall off the losses or create a good bank/bad bank. The Street now believes that is all but inevitable.

Elsewhere, traders are pointing to the bond market rally, along with a failure of commodities to rally (never mind a 2 percent rally in gold), as further sign that equities will have trouble rallying short term.

Why? Because they are looking for selling in bonds to finance some stock purchasing, and the failure to rally in commodities is an indication that sentiment for cyclicals in the second half remains poor.

The Dow intraday closing low on November 21 was 7449; we are still 500 points away from that.

Finally, just to illustrate the breathtaking drop in financial value: Citigroup announced that it was going to be selling its Japanese retail brokerage operation, Nikko Cordial, only one year after it acquired the company for $17.7 billion.

Citi's market cap at the close today was $15.5 billion.

    • Investors Brace for Brutal News in Industrial Sector

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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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