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Market Insider with Patti Domm Trader Talk with Bob Pisani


  Monday, 22 Dec 2008 | 9:21 AM ET

Stock Volatility Gone Or Just Taking A Holiday?

Posted By: Bob Pisani

We have been seeing volatility and volumes decline for the past two weeks. Whether this is due to the Christmas slowdown or to a genuine belief that stock volatility will be moving down in the coming months is hotly debated. More on this later.

Futures came off their lows as the People's Bank of China cut its benchmarklending rate by 27 basis points to 5.31 percent and also cut its reserve requirement.


1) Toyota lowered their fiscal year (which ends in March) operating profit guidance from a 600 billion Yen profit to a 150 billion Yen loss, well below anyone's forecast. This is only the second yearly loss since the company was founded in the 1930s, so it is getting a lot of play on the Street. Lower sales are the main issue: they cut their 2009 shipment guidance to 7.54 million units from 8.24 million.

2) GM trading down about 7 percent as Credit Suisse said what everyone on the Street already knows: that once the final deals are reached with the government it is likely the equity in GM is zero or near-zero.

3) Walgreens down 6 percent asit reported earnings below expectationsand like many retailers said it would reduce its store openings in 2009.

4) Food service company Sysco, noting that "market conditions have become progressively more difficult in recent weeks," said it expects sales to be flat to slightly negative for the quarter compared to the same period last year.

- The Dow 30 at a Glance


CNBC's Names in the News:




Questions? Comments? tradertalk@cnbc.com

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  Friday, 19 Dec 2008 | 2:37 PM ET

Auto Bailout Cheer vs. Bank Downgrade Fear

Posted By: Bob Pisani

Mary Thompson is in for Bob Pisani today.

As the week draws to a close, stocks are holding onto modest gains.

The news the government is extending $17.4 billion in loans to Chrysler and General Motors was well received at the open, but markets haven't been able to sustain those gains.

Retailers are acting squirrely on concerns about weak Christmas spending, and financials are mixed after Standard & Poor's cut its outlook and ratings on 12 major banks including JP Morgan, UBS and Citigroup, on concerns about how they will perform in the face of a global slowdown.

More CNBC Intelligence:

At the open we saw big, big volume, thanks to today's quadruple witch, or the simultaneous expiration of stock and index options and futures. Traders don't expect this to result in a lot of volatility at the close, though, because there wasn't big short interest on the OEX options coming into the expiration.

Traders are also waiting to see what companies get kicked out, and pulled into the S&P indices as the quarterly rebalancing of the S&P 400, 500 and 600 occur after the close.

One thing giving traders hope is the continued slide in the VIX. This volatility index, a measure of fear in the markets, broke below its November low of 44.25 today. Its been trending down for the last two weeks, leading some to believe the worst may be over — but then, they add, we will see what the new year brings.


Questions? Comments? tradertalk@cnbc.com

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  Friday, 19 Dec 2008 | 9:43 AM ET

Off The Trading Floor For Now

Posted By: Bob Pisani

I am still out of the office, as you may have noticed. I'll be back next week with new posts from the trading floor. See you then.

Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 17 Dec 2008 | 4:09 PM ET

The Two Big Worries For Traders Now

Posted By: Bob Pisani

There is an eerie stillness in the stock market. The wild price swings and huge volume that we have seen from September through the beginning of December has quietly gone away. The panic selling has gone away. True, there is little buying interest as well, but nobody is particularly complaining about the calm.

Still there are two big worries out there:

1) Redemptions are not over; they will pick up in January and February as investors try to pull out even more money from hedge funds on the heels of the Madoff scandal. It has happened right now because the period of asking for redemptions during this quarter has passed.

2) The weaker dollar is fueling arguments from the Armageddon Crowd that the world is losing confidence in the U.S. government's creditworthiness;

3) The traders who are trying to play the "reflation trade" (buying commodities/commodity stocks) are worried that a weaker dollar in the past two weeks is not causing commodities to move up; that relationship (weaker dollar/stronger commodities) worked very reliably in the past few years, but for whatever reason it is no longer working.

Another example of the eerie calm: GM announced that due to a cash crunch they were suspending work on the factory that will build the engine for the Volt. This is the car they are hanging their future on! What happens? Nothing. Stock does not move. Not clear when they will resume, but GM says they can still deliver Volts by 2010. With no engine?

Morgan Stanley's numbers are WAY below analyst expectations. Outside of opening retail banking branches, there is very little room for growth. What happens? Nothing! Stock up 4 percent.

- The Dow 30 at a Glance

Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 17 Dec 2008 | 9:14 AM ET

Five Percent And Below Mortgage Rates Are Here

Posted By: Bob Pisani

The 5 percent (and below!) 30-year mortgage is here. Mortgage rates are dropping on the heels of the Fed's announcement yesterday. Wells Fargo , for example, is listing a 30-year fixed rate conforming mortgage at 4.875 percent this morning!

By comparison, the Mortgage Bankers Association reported that last Friday 30-year fixed rate mortgages fell to 5.18 percent, which was the lowest levels since June 2003, according to the MBA.

The bad news is that while refis are up 250 percent in the past 6 weeks, applications to purchase a home are up only 10 percent. Let's see if news of below-5 percent mortgages makes a difference.


1) Morgan Stanley trading down about 6 percent pre-open as they reported a loss much greater than expected both on the bottom line (loss of $2.24 vs. loss of $0.34 expected) and the top line ($1.83 billion vs. Reuters $4.25 billion).

There is some good news here--they cut the amount of leveraged used from 32.6 to 11.4, so risk has been greatly reduced.

Still, the release is full of what are essentially downsizing announcements:

--closing residential mortgage origination

--cutting principal investments

--resizing the prime brokerage business

--exiting select proprietary trading strategies

Where's the new business coming from? Well, they are beginning a retail banking group.

2) Iron ore producers like Rio Tinto are trading down about 7 percent on a report in the WSJ that two top Australian coking coal mines (used for steel production) are cutting production.

3) CIT down 17 percent on a $250 million secondary offering.

4) ConAgra reported second quarter earnings slightly above expectations and reaffirmed their full year 2009 guidance.

5) General Mills upabout 4 percent on earnings.

6) Adobe up about 9 percenton better earnings.

Did we all read the same Fed statement? I am baffled by comments made by some stock experts that the Fed has used all its bullets by reducing rates essentially to zero. The very purpose of the Fed statement was to make it clear that the Fed had other options besides reducing interest rates, and it would use all of them: "The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity." Get it? They will use other imaginative methods, including more alphabet-soup assistance programs, and if they don't work they will use other methods.

    • Paulson: No Plans to Seek the Rest of TARP Fund

- The Dow 30 at a Glance

CNBC's Names in the News:




Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 16 Dec 2008 | 4:06 PM ET

What The Fed Is Trying To Do

Posted By: Bob Pisani

The reflation trade is back. That is the Fed's message. And it has major implications for stocks.

With interest rates near zero, and the Fed making plenty of money available, it should be stimulating the economy, but it isnt. That's because those who matter--the banks and consumer--choose to hoard the money instead of lending or spending.

What to do? The classic way out is to reflate the economy. When there is moderate inflation, there is less inclination to stay in cash. That is what the Fed is trying to do.

The Fed has said they will do anything they need to do. Traders are taking this as open acknowledgement they will be printing money. So traders are buying commodity stocks on the reflation trade: gold, coal, metals, steel.

Insurance stocks like MetLife and Prudential were strong as well --as insurance companies own a ton of paper and physical real estate, which will be helped by the Fed's actions.

No more guidance! Start of a trend? Our parent company, General Electric, has reaffirmed its 2008 guidance, but perhaps more importantly they have announced they will no longer be providing quarterly guidance.

The GOOD NEWS is that it will free the company from the shackles of estimating earnings and revenue when it has become increasingly difficult to do so, and may make managers less obsessed with meeting quarterly targets.

The BAD NEWS is that analysts (and the media) will have a tougher time keeping a "scorecard" of a company's performance. After all, if a team doesn't play the game, how can we know exactly if they are winning or losing? Those in favor of eliminating guidance argue that GE will certainly continue to provide some kind of update on trends impacting their businesses.

This topic will be hotly debated on CNBC and in the financial media in the future, since it is likely GE's stance will make it easier for other companies to abandon guidance as well.

True, GE isn't the first: McDonald's famously abandoned guidance in 2003, as did Coca-Cola in 2004, and Dell has also abandoned guidance. But given the economic news, this may be the start of a trend.

- The Dow 30 at a Glance

Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 16 Dec 2008 | 3:14 PM ET

The Fed's Historic Home Run

Posted By: Bob Pisani

In the boring world of Fed statements, this one was an eye-opener, indeed potentially historic.

It was different in tone AND content from other Fed statements. How different? Traders on the floor looked a bit confused as they tried to parse through a lot of headlines that sounded very different from previous statements.

From a traders perspective, the Fed hit all the right notes. Stock traders wanted the Fed to come out swinging on several issues:

1) How long will rates stay low? "Weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time."

2) What will the Fed do to help the economy and combat deflation besides cutting rates? "The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability...The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity."

3) Will the Fed continue to buy mortgage-backed securities? The Fed "stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant."

With this statement, the Fed is essentially saying, "Are you a simpleton? If you are not sure about what we are doing, here let us spell it out for you. We will do everything."

"Are you a doubter? If you are, stop doubting. We are on board."

CNBC's Names in the News:

General Electric

Goldman Sachs


Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 16 Dec 2008 | 9:13 AM ET

Goldman Sachs: A Sigh Of Relief On Street

Posted By: Bob Pisani

The CPI number, which posted a decline of 1.7 percent on the headline numberand core at 0 percent, both below expectations, was not great but bear in mind much of this is due to the decline in commodities. This decline has likely run its course, so we may see much more moderation in the decline in CPI and PPI. Also bear in mind the dollar has been weaker recently, which will put more upward pressure on commodities.


1) You could hear a sigh of relief on the Street as Goldman reported a loss of $2.12 billion, or a loss of $4.97 per share.

This is pretty terrible, but it was about in line with expectations: many analysts had already expected a loss of close to $5.00 (consensus was a loss of $3.73), so anything in the ballpark was good news.

As expected, Goldman reported significantly losses in Principal Investments (including $961 million from losses in commercial real estate), and a $631 million loss due to the decline in value of their investment in International and Commercial Bank of China. There was also a loss of $3.41 billion in Fixed Income due to losses on leveraged loans and residential mortgages.

Goldman trading up about 3 percent pre-open.

2) The Fed will cut rates today, the question is whether it will make a difference. ECB Pres Trichet late yesterday said "Do we have a feeling there is a limit to the decrease in rates? At this stage certainly yes."

3) Gee, who will sign the paychecks? Best Buy trading up 9 percent after offering a separation package to nearly all corporate employees, and reporting earnings a bit ahead of expectations ($0.35 vs. $0.24 consensus). They are reducing capital expenditures by 50 percent next year.

4) Fertilizer stocks trading up as Merrill Lynch upgraded Potash ,Mosaic , and Agrium though Credit Suisse lowered estimates for Potash, noting weaker demand and prices.

5) Automotive parts supplier Johnson Controls has withdrawn its 2009 guidance; no surprise given the uncertainty in the automotive sector. More surprising is their estimate of 2009 auto sales: 9.3 million units, probably one of the lowest estimates on the Street.

6) Yesterday's volume and price action was about the quietest since Labor Day. In fact, the volatility has been notably lower for the past week and a half. The S&P 500 is down about 40 points since hitting its recent closing high on December 8th, but the decline has not been intense; there has not been particularly strong buying or selling pressure in the past week and a half.

This has been part of a trend: December has seen a smaller range of price swings than November, and November smaller than October.

There is no guarantee this will continue. In particular, there has been concerns that we will see a new round of redemption requests after January 1 in light of the Madoff scandal . But for the moment, market participants (other than those who trade volatility) are happy with the more stable markets.

- The Dow 30 at a Glance

Questions? Comments? tradertalk@cnbc.com

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  Friday, 12 Dec 2008 | 4:35 PM ET

Markets Drive Over Auto's Bad News

Posted By: Bob Pisani

"I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight." Senator Harry Reid, Thursday night. Gee, Mr. Senator, don't get into the stock commentary business.

The markets today continued to rally in the face of bad news, as it has been doing for the past two weeks.

More accurately, the market was mostly flat, with a few more advancing than declining stocks, but many stocks were just fractionally on either side of positive or negative.

Real estate investment trusts (REITs) had a great day because General Growth Properties announced it successfully refinanced almost $900 millino in debt, though there are still other debt deadlines the company is facing. Up 27 percent.

Financials like KeyCorp , Citi , Bank of America , and US Bancorp were fractionally on either side of positive or negative on light volume.

The weak spot today was energy stocks, where several E&P names like Devon and EOG and oils like Occidental were on the downside 2 to 6 percent, but these stocks have had nice moves up earlier in the week.

Goldman Sachs cut its 2009 outlook for oil prices to $45 a barrel.

Are we at a bottom? Bears insist there will be more redemptions after Jan. 1 that will pressure the market, and the economic news will still come in worse than expected.

Next week, the big news will be Goldman's earnings (see my earlier note ) Tuesday and Morgan Stanley on Wednesday.

For the week: tech was a standout, with the NASDAQ up 1.6%; Dow and S&P down fractionally, Transports the big loser, down 5.8 percent.

- The Dow 30 at a Glance

Questions? Comments? tradertalk@cnbc.com

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  Friday, 12 Dec 2008 | 3:49 PM ET

Why You Shouldn't Be Stunned By Madoff

Posted By: Bob Pisani

Stunned by Bernie Madoff? There’s plenty like him in the long history of Wall Street.

This is one in a long string of scams. These scams are an integral part of the history of Wall Street, but are particularly prevalent during periods of great bull markets.

One of the most famous and widely talked about scandals was the case of Richard Whitney, the President of the New York Stock Exchange from 1930-1935, who was widely hailed as a Titan of Wall Street during the Depression but was sent to Sing Sing Prison in 1938 for embezzlement!

Whitney ran a successful bond brokerage firm in the mid-1910s, becoming a Vice President of the NYSE a few years later.

What was not known, as Whitney climbed to the top of the financial elite of New York, was that he was involved with all sorts of speculative investments and was racking up big losses even when he was the NYSE President. He successfully concealed these losses by borrowing heavily to cover the losses, then turned to embezzlement, even going so far as to steal funds from the NYSE Gratuity Fund and the New York Yacht Club (he was the Treasurer!)

He was caught only after he retired from the NYSE, when the comptroller of the NYSE exposed him. He declared bankruptcy, pled guilty, and went to Sing Sing prison for three years, where he was released in 1941. He lived quietly until he died in 1974.

- The Dow 30 at a Glance

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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