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Market Insider with Patti Domm Trader Talk with Bob Pisani


  Friday, 12 Dec 2008 | 9:19 AM ET

White House "Last Stop" For Automakers?

Posted By: Bob Pisani

While futures are down 30 points as of 9 am ET, this is a big improvement over late last night, when futures were down 45 points.

With the failure to pass an auto loan bill, the Treasury Department is now essentially the "last line of defense" for the auto makers. They can now provide a bridge loan through the TARP, or provide or guarantee a debtor-in-possession facility to fund a pre-packaged Chapter 11 proceeding.

The AutoNation CEO, Milt Jackson, said on our airthat President Bush was likely to rescue the auto industry by agreeing to some kind of bridge loan until the next administration can enact a broader bill.

GM down 26 percent, Ford down 15 percent, Visteon down 7 percent. Lear down 25 percent, as they withdrew 2008 guidance.


1) Although the dollar is slightly weaker, commodities are down, and many commodity stocks are down 5 to 10 percent. Shipping stocks like DryShips (downgraded at Credit Suisse), Excel Maritime , and Diana Shipping are down 7 to 12 percent.

2) Financials are down 4 to 7 percent.

3) Caterpillar down 5 percent, downgraded to Sell at Goldman, citing weaker spending by commodity companies and a slowdown in the credit markets.

4) The other hot topic on the Street is the arrest of money manager Bernard Madoff. Madoff was widely known and respected, and during dinner last night with several well-known figures on the Street it was the main topic of discussion. He had a large investor base and the apparent fraud will hurt investor confidence in the high-end money management business. There are several well-heeled country clubs on Long Island that will be losing a large part of their members.

Update: Futures spiked shortly after 9 AM ET as President Bush said he was willing to consider use of TARP funds for a bridge loan to auto makers.

The cynical take on this on the NYSE floor was that Bush had signalled to the Senate Republicans YESTERDAY that he would use the TARP to provide a bridge loan to the auto makers if the Senate failed to pass the bill.

This signal provided the political coverage for the Republicans to talk tough to the unions.

So the Senate Republican leadership got to take a stand, and would not be blamed for an auto collapse because the President rides to the rescue.

- The Dow 30 at a Glance

CNBC's Names in the News:

Wells Fargo

JP Morgan


Questions? Comments? tradertalk@cnbc.com

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  Thursday, 11 Dec 2008 | 4:17 PM ET

Here Comes The Profit Taking (Update)

Posted By: Bob Pisani

You knew it was going to happen. I've noted that energy and material stocks have notably outperformed the rest of the market for the past several days.

Today, they took profits in these two sectors, with big names like AK Steel (down 7 percent), coal producer Massey (down 6.2 percent) and oil service giant Nabors (down 7 percent) all going from positive to negative right about 2 pm ET.

What happened? The simple answer is that we know that demand for commodities will remain weak until we work through the global recession, and the markets will not allow these groups to get too far ahead of everyone else.

Some would also like to blame the selloff on JP Morgan CEO Jamie Dimon, who noted in a 2 pm ET interview on CNBC that while November was bad, December was looking terrible as well, and that 2009 was looking "tough."

Financials were weak all day, but weakened again just before 3 pm ET. US Bancorp provided an update on the fourth quarter this morning, and the bottom line is that there is good likelihood of a jump in bad loans, and that the environment remains "difficult."

Nothing new here from Dimon or US Bancorp, but a reminder that the environment is not improving is always bracing for traders.

The REIT index has rallied 60 percent off its November lows at the close yesterday; today it gave back about half of those gains. Many of the big names were down 20 percent.

What happened? Again, nothing new. REITs face refinancing risks as large mortgages come due, and the market reminded traders not to take rallies too far, too fast.

UPDATE: Futures are a bit weaker on a report that hedge fund manager Bernie Madoff was arrested and charged with criminal securities fraud. Mr. Madoff ran a large hedge fund and was well known on the Street, and was very successful, though he refused to ever discuss how exactly he made his money.

- The Dow 30 at a Glance

Questions? Comments? tradertalk@cnbc.com

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  Thursday, 11 Dec 2008 | 11:30 AM ET

Daschle: Why He's Good Choice for HHS

Posted By: Bob Pisani

The appointment of Tom Daschle as Secretary of Health and Human Services is a big plus for those of us (including myself) who believe that healthcare needs to be a front-burner issue for the Obama administration.

Mr. Daschle has long been involved in health care reform, even going back to the early 1990s when he played a part in Sen. Hillary Clinton's early efforts.

He wrote a book on the subject: "Critical: What We Can Do About The Healthcare Crisis."

In it, he proposed the creation of a Federal Health Board, similar to the Federal Reserve, which would

1) define a minimum health benefit
2) regulate insurance marketing
3) standardize medical records
4) set prices for new procedures

This would only apply to government programs (Medicare, Medicaid, VA) but private insurers could follow.

Mr. Daschle has also indicated he might support:

1) universal coverage through Medicaid
2) direct government negotiation for drug prices

While cries of "Socialist Medicine" will certainly be heard, and this deserves to be considered, the fact that there are 50 million people without healthcare in this country, that many cannot afford it, is simply scandalous and there needs to be proposals put forth to address that issue.

The question of course, is how much the economic crises will push healthcare reform to the back burner. This could be a problem for hospital and HMOs, who might delay spending if they don't know what the new landscape would entail or when reform might be forthcoming.

That is a problem for investors in healthcare companies, so the President-elect needs to give some kind of timetable for this series of reforms, once they decide what they want.

    • New Poll Warns Daschle, Obama: Mandatory Health Insurance Big Loser with Public

- The Dow 30 at a Glance

Questions? Comments? tradertalk@cnbc.com

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  Thursday, 11 Dec 2008 | 9:07 AM ET

Dollar Weighs On Traders

Posted By: Bob Pisani

Futures dipped a few points as jobless claims hit a 26-year high. But the big topic on trading desks is the dollar, which may be weaker on expectations the U.S. will ease interest rates next week, so commodities and some commodity stocks (notably gold) are stronger. Other commodity stocks like iron ore companies are weaker on concerns over slower global demands.

A couple companies in the industrial space confirmed a notable slowdown in the last several weeks:

1) Engine maker Cummins revised its 2008 outlook, expecting sales to increase 9 percent over 2007, compared to previous guidance of a 12 percent increase. Cummins confirmed what many companies have been seeing: a notable drop in sales in the last several weeks. Still, sales are growing, and they noted 2008 wll be the fifth consecutive year of record sales and profits.

2) Stanley Works , which has experienced "rapidly deteriorating business conditions" in its Construction and Industrial segments, is down 10 percent pre-open as they lowered earnings for the quarter. They are laying off 2,000 employees, 10 percent of the current base.

    • Jobless Claims at 26-Year High; Import Prices Fall
    • Auto Bailout Prospects Look Grim in the Senate


1) Lilly up 3 percent pre-open, even though thy provided 2009 guidance of $4.00-$4.25 (slightly below analyst estimates of $4.26, which includes the cost of the acquisition of ImClone) and reiterated 2008 guidance.

2) Boeing down 3 percent as they update the schedule for its 787 Dreamliner program. The first flights are now moved to the second quarter of 2009 and first delivery to the first quarter of 2010, which will have some impact on earnings. The machinist's strike caused some of the delay.

- The Dow 30 at a Glance
CNBC's Names in the News:




Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 10 Dec 2008 | 4:14 PM ET

Why The Market Is Looking More "Normal"

Posted By: Bob Pisani

The market may seem boring today, but look under the hood--something is happening. That "something" is rotation: traders are looking to buy some stocks and sectors, and sell others.

Huh? This is what they used to do, before the Lehman bankruptcy. Then it went away, as they sold everything indiscriminately. Now, normal rotation may be coming back.

Between the Lehman bankruptcy on September 15th and the market bottom on November 20th, it's amazing how little deviation there had been between techs, energy, materials, industrials, even financials--as volatile as they have been--are not far from the overall horrible performance of other sectors.

In other words, not much has outperformed or underperformed in that period. However, since the November 20th bottom, there has been the beginning of efforts to trade stocks as individual investments, rather than as a single asset class. This is very encouraging!

For example, while there was a rally in financials in early December, they have been selling off this week:

Financials this week

JP Morgan up 0.4%
PNC down 1.3%
US Bancorp down 5.7%
Regions Fin. down 6.9%

»Read more
  Wednesday, 10 Dec 2008 | 9:07 AM ET

Get Used To The Layoffs

Posted By: Bob Pisani

For at least the next couple months, we are going to have to get used to hearing companies announce job layoffs and earnings reductions.

1) Commodity producer Rio Tinto up 20 percent pre-open, laying off 14,000 globally, reducing capital expenditures, and revise production expectations for copper, iron ore and aluminum downward.

Other commodity stocks are up as well as commodities are up 2 to 4 percent this morning.

2) Praxair , the largest producer of industrial gases, is cutting 1,600 jobs and reducing its earnings guidance due to a drop in demand.

3) Kodakdown 16 percent pre-open; has withdrawn its second-half and full year 2008 guidance, but did not provide a revised forecast. They will update their guidance when they report fourth quarter earnings on January 29th.


1) Not great news on the mortgage front: the ABA said 30-year mortgages rates fell to 5.45 percent, down 2 basis points from last week (that's good news), but the big boost in purchases applications that we saw last week has largely dissipated. Purchases fell by 17.4 percent after gaining 38 percent. This will create debate that it is not the cost of money that is the issue, but there is either: 1) less willingness to buy regardless of the cost, or 2) lending standards are making it difficult to get loans. Refis, at least, were down only 0.9 percent after a 203 percent gain.

    • US Mortgage Applications Dip after Big Surge

2) The $15 billion loan (bailout, whatever) that the automakers are getting makes one thing clear: forget about developing fuel-efficient vehicles, at least for this round. The money will be used to just to keep them afloat, and the whole issue of radically redesigning vehicle platforms and improving energy efficiency is not even on the table. Yet.

3) Remember a couple weeks ago when there was a riot after toy workers in China had been laid off? China exports dropped 2.2 percent in November from a year earlier, the first monthly decline since June 20.

- The Dow 30 at a Glance


CNBC's Names in the News:




Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 9 Dec 2008 | 4:07 PM ET

Bad News Keeps Hammering Markets

Posted By: Bob Pisani

How much of the bad news is priced into the stock market? The answer is, the news is still coming in a bit worse than most market participants are expecting.

Toward the close, the indestructible Wal-Mart announced that they were suspending their stock repurchase program due to the economy and credit market instability.

OK, it's not a big deal, there was only $5 billion left in the program to re-buy, and Target has already suspended their program, but it is emblematic of the problem. Dropped 2 percent quickly.

Consider also:

1) Lots of job layoffs announced in the last day (Sony, Molex,Danaher, etc.)

2) Still getting lower guidance/shrinking profits for shippers (FedEx, Con-Way), electronics (Sony, Samsung, Texas Instruments,National Semi), and manufacturers (Danaher).

FedEx the stock of the day: think the lower guidance they provided for the next two quarters, which you could drive a truck through, has been priced in? No! FedEx down 16 percent today, the biggest one-day drop since 1987.

This despite all the tailwinds FedEx has going for it:

1) Jet fuel prices way down;

2) DHL (one of its main competitors) going away.

The FedEx formula is pretty simple:

1) FedEx is a classic early cycle stock

2) If economy turns up in 2H 2009: buy FedEx NOW

3) If no upturn until 2010: no rush

Today it is looking more like 3) than 2).

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  Tuesday, 9 Dec 2008 | 12:08 PM ET

What FedEx Is Telling Us

Posted By: Bob Pisani

The good news is that the S&P remains in positive territory for the month of December (so far), and volatility is dropping. So we are seeing technical improvement: higher highs and lower lows.

The bad news is that the news flow remains poor--the question is, how much poorer than expectations will the December economic numbers be?

Look at FedEx . Everyone knows shipping is weak. The issue is this:

1) FedEx is a classic early cycle stock;

2) if you believe the economy will start turning up in the second half of 2009, you will be considering buying FedEx NOW;

3) if you believe the economic recovery is pushed into 2010, there is no urgency to buy FedEx yet.

FedEx's commentary are making a lot of the people in camp 2) move into camp 3), because they are implying that global demand is softer than expected a month ago, and getting worse, implying a longer period of bumping along the bottom than some anticipated.

- The Dow 30 at a Glance

Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 9 Dec 2008 | 9:11 AM ET

Jobs: Going And Going And Going

Posted By: Bob Pisani

1)The job cuts continue, as we are now in the heart of the recession.

a) Sony said it would cut 16,000 jobs, half full-time and half part-time. That’s about 4 percent of its full time workforce. Their music players are facing tough competition from Apple and flat-screen TV sales have been declining.

Separately, Korean electronics rival Samsung said profit markets have also "vaporized" on its liquid crystal display business, and they were not sure how long the business downturn would last. They anticipate personal computer shipments slowing to single digit growth, with slower growth for handset sales as well.

b) Manufacturing is having a tough time: Danaher is cutting 1,700 jobs, about 3 percent of its workforce, and lowering earnings guidance for the quarter (to $1.03-$1.10 from $1.17$1.25)--Danaher is famous for its Craftsman line of tools.

This follows announcements of lower earnings from Illinois Tool Worksand 3M .

2) Elsewhere, lower guidance is weighing on several stocks:

a) FedEx down 10 percent pre-open, lowered guidance for the current (second) quarter, and guided lower for the full year (to $3.50-4.75 vs. prior $4.75-5.25). What would their guidance have been had oil been at $100 a barrel?

b) Trucker Con-Way guided full year earnings lower as well, to $2.20-$2.35 vs. $2.60-$2.80. They have reduced their workforce by 8 percent.

c) Texas Instruments guided revenue for the current quarter lower ($2.30-$2.50 billion vs. prior $2.83 to $3.07 billion)

d) National Semi said revenue would be down 30 percent in the following quarter (hurt by lower handset demand)

3) Super-contango: traders have noted to me that the December crude futures contract, at $43.85, is way below the cost of the December 2009 contract, at $57.63. Even accounting for carrying costs, one could make a tidy profit on this trade, which just involves buying the December 2008 contract and selling the December 2009 contract.

4) It sounds like a lot, but it isn't:

a) A Reuters poll of analysts expect the Hong Kong Hang Seng index to rise 22 percent from where it is now. (The Hang Seng is down 47 percent this year!)

b) A poll of analysts and fund managers in Japan predict the Nikkei will end 2009 up 13 percent from current levels (Thanks: the Nikkei is down 45 percent this year!)

- The Dow 30 at a Glance

Questions? Comments? tradertalk@cnbc.com

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  Monday, 8 Dec 2008 | 5:06 PM ET

Late Day Comments Help "Lower" Markets

Posted By: Bob Pisani

There was a broad rally today....four to one advancing to declining stocks, but late-day comments from Federal Express, which lowered its 2009 earnings guidance, as well as negative comments from Con-Way in the trucking space, and Texas Instruments, National Semi, and Altera in the techs are weighing on futures after the close.


1) FedEx lowered guidance for the current (second) quarter, and guided lower for the full year (to $3.50-4.75 vs. prior $4.75-5.25). What would their guidance have been had oil been at $100 a barrel?

2) Trucker Con-Way guided full year earnings lower as well, to $2.20-$2.35 vs. $2.60-$2.80. They have reduced their workforce by 8 percent.

3) Texas Instruments guided revenue for the current quarter lower ($2.30-$2.50 billion vs. prior $2.83 to $3.07 billion)

4) National Semi said revenue would be down 30 percent in the following quarter (hurt by lower handset demand)

5) Chip maker Altera also said sales would be down 9 to 12 percent compared to the current quarter; they are seeing slower than expected sales across all market segments--they sell to the computing, telecom, industrial and automotive industries

On the markets, the big question today was, how big will the infrastructure part of the stimulus package be? President-elect Obama made a point of saying it would be big, but how big? Some analysts said it could be as big as $130 billion.

That stimulated buying in engineering and construction stocks like Fluor. These stocks have been rallying for a couple weeks. More importantly, commodity stocks and oil service stocks--which have not rallied--staged a terrific move up today, with many up double digits.

- 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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