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Market Insider with Patti Domm Trader Talk with Bob Pisani


  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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  Monday, 8 Dec 2008 | 3:09 PM ET

Infrastructure Package: Big, But Just How Big?

Posted By: Bob Pisani

The markets are doing well for the second day because the awful jobs number on Friday has convinced traders that a huge stimulus package is coming. President-elect Obama did nothing to dispel that notion over the weekend.

How big will the infrastructure stimulus plan be? There is talk it could be as much as $130 billion. How much is that? It is roughly the cost of the entire interstate highway system from its inception.

There are three components to this that are exciting investors:

1) Highway infrastructure;

2) Make public buildings more energy efficient (replace heating systems, efficient light bulbs, etc.);

3) Modernize and upgrade school buildings.

Infrastructure. Don't kid yourself: the credit crisis has stalled a lot of projects. Is there really any "shovel-ready" projects out there? The American Association of State Highway Transportation Officers (AASHTO) says there are $64 billion in ready-to-go projects already out there (interestingly, they increased this more than three-fold from $18 billion in January to $64 billion on Friday...hmm). This is big deal for companies like Granite Construction and Vulcan Materials . Here is the press release.

Modernize and upgrade school buildings, and make public buildings more energy efficient. This would be a boon to companies like Emcor , which makes power generation systems, and HVAC (heating, ventilation and air conditioning).

This is good news, but let's get real:

1) Right now, the market seems to be pricing in the most aggressive figures, which are unlikely to happen. Granite Construction, for example, is trading at 17x forward earnings already! The stock was at $30 10 trading sessions ago...It's $48 today! Think the word is out?

  • What Market Pros Think
  • Predictions: Infrastructure Hot
  • Tax Policy Raises Questions
  • 2) Don't exaggerate the effects of infrastructure stimulus. According to BMO Capital, spending on public infrastructure for the past year was roughly $160 billion; spending on residential construction was $645 billion.

    - The Dow 30 at a Glance


    Questions? Comments? tradertalk@cnbc.com

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      Monday, 8 Dec 2008 | 12:17 PM ET

    Markets Rally On Stimulus Fever

    Posted By: Bob Pisani

    The awful payroll numbers on Friday finally seems to have galvanized Washington and the rest of the world--stimulus fever is now global, with additional packages in India and discussions of more in China and France.

    The infrastructure stimulus plan is pushing engineering stocks like Shaw Group and Jacobs Engineering up double-digits, and auto stocks like GM , Visteon ,TRW , and Borg Warner up double digits as well on a belief that some kind of money will be forthcoming for the Big Three shortly.

    The rally is based on the belief that both the quantity and quality of the stimulus will be such that it will be the "X Factor" that turns the economy. There is also a widespread belief that the Feds will figure out which programs work, and which don't, and that the bang for the buck will increase.

    Now, here's the bad news:

    1) Much of the success depends on the dollar remaining strong; if dollar holders start selling aggressively on the belief that the U.S. is less creditworthy, inflation will return in a big way. While reflation is a desire, inflation is not.

    2) It's not clear that the main focus of the stimulus--infrastructure--will be successful long term. It sounds right, because there is a big bang for the buck initially from jobs and commodity production. But as Peter Boockvar at Miller Tabak noted: "The Obama proposed stimulus plan focused on public works is right out of the play book of government attempts to help the economy in the 1930's and 1950's and was a main focus of the Japanese in their lost decade, it helped for a short period of time and then flamed out because there was nothing sustainable from it because there is no lasting profit being driven."


    - The Dow 30 at a Glance

    Questions? Comments? tradertalk@cnbc.com

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      Monday, 8 Dec 2008 | 9:06 AM ET

    Stimulus, Stimulus, Stimulus

    Posted By: Bob Pisani

    Futures are trading up on hopes that the stimulus package from India, talk of a greater stimulus package from China, and President-elect Obama's talk to launch the biggest public infrastructure works project since Eisenhower will be game changers in the global slowdown.

    Commodity stocks like US Steel , Freeport-McMoran ,Alcoa and others are trading up 7 to 10 percent on the general rise in markets as well as a strong commodity market this morning.

    Financials are also trading up 4 to 7 percent.

    But we have several reminders that companies are still in the process of adjusting their expectations for 2009:

    1) 3M, which is holding an analyst meeting today, reduced it's 2008 earnings guidance by about 8 percent, and more importantly said 2009 earnings would be $4.50-$4.95, well below analyst estimates of $5.31. It's not just volume declines; differing exchange rates are also expected to have a negative impact.

    2) Illinois Tool Works, holding its annual meeting in New York, lowered their fourth quarter earnings forecast, from $0.44-$0.52 from $0.74-$0.82, reflecting "significant further weakening in North American and international end markets." Down 5 percent pre-open.

    3) Dow Chemical is laying off about 5,000 full-time employees, about 11 percent of its workforce. However, the closing of several plants will also idle about 6,000 contract workers.

    4) How strange are things? MetLife is also holding an investor meeting; they announced fourth quarter earnings would be far from analyst expectations for 2008 ($0.20 vs. expectations of a gain of $0.74) as well as 2009 ($3.60-$4.00 vs. expectations of $4.48).

      • Merrill's Thain Wants $10 Million Bonus: Report

    Still, the stock is trading up 6 percent pre-open. The only good news is that the shortfall was due to a "decline in variable investment income and the poor equity markets"; their core insurance business continued to perform well.

      • GM's Lutz: No 'Sacrificial Lambs' In Bailout

    New from CNBC.com:

    - The Dow 30 at a Glance


    CNBC's Names in the News:

    General Motors



    Questions? Comments? tradertalk@cnbc.com

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      Thursday, 4 Dec 2008 | 3:42 PM ET

    Hopeful Sign: If Selloff Stays Shallow

    Posted By: Bob Pisani

    Will stocks stop dropping on bad news? Never mind the auto hearings, that is the No. 1 question on trading desks today.

    Stocks are down Thursday, but the relatively modest decline (50 points, or 0.6 percent on the Dow), the light volume, and the breadth (3-2 declining to advancing stocks) is far less a response than one might expect given the poor news flow.

    This has happened several times in the last two weeks, and it has made traders somewhat more optimistic. The S&P 500, as of yesterday, has been up seven of the last eight trading sessions.

    Consider what is happening today:

    1) DuPont : trading UP. even though fourth quarter guidance is well below expectations, 2009 earnings guidance is not nearly as bad as expected ($2.25 to $2.75 versus analyst expectation of $2.80)

    2) Retailers: trading UP. Though sales, for the most part, were down double digits, the numbers were not worse than expected.

    3) Nokia : trading UP. Said handset market volume would be down 5 percent or more next year. But the whisper numbers were that they would announce volume would be down 10 percent.

    The pattern is clear: news is bad, but in many cases it is not as bad as feared. This means the Street has become extremely bearish, and any kind of news flow slightly better than expected will help.

    Now, here is another important test: if we follow the usual pattern, the market will soften even more toward the close into the jobs number tomorrow morning. That's what has happened ahead of most big numbers in the past few weeks.

    If this does not happen, it will be another positive signal to the markets.

    Does it mean the bottom is in? No, because the news flow could always get worse; but it would be important to break the "sell at the close" mentality.

    CNBC's Names in the News:


    General Motors

    Ford Motor


    Questions? Comments? tradertalk@cnbc.com

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      Thursday, 4 Dec 2008 | 11:40 AM ET

    Pitting Wall Street vs Auto Makers: Is It Fair?

    Posted By: Bob Pisani

    Is it fair to pit Wall Street against the auto makers?

    I'm not one to defend "Wall Street," but the senators at the auto hearing noting that we have given billions to the financial industry and have been giving the auto companies a hard time with their request for money are missing several important points:

    1) Lehman went out of business;

    2) Bear Stearns was dismantled and given to JP Morgan ;

    3) many other businesses — including Washington Mutual — have been absorbed with big losses of money and personnel;

    4) the stock of an AVERAGE financial company is down 60 percent this year;

    5) tens of thousands of people have been and are being laid off in the financial services industry;

    6) each and every one of these companies is making massive changes to their business plans.

    Seems to me we have already made some pretty severe demands on the financial services industry.

    CNBC Investor Tools:

    CNBC's Names in the News:

    General Motors




    Questions? Comments? tradertalk@cnbc.com

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      Thursday, 4 Dec 2008 | 9:35 AM ET

    Europe Banks in Huge Rate Cuts; U.S. Earnings Glum

    Posted By: Bob Pisani

    Sweden, Bank of England, and now the ECB have all cut interest rates, the ECB by a record 75 basis points to 2.5 percent.

    On the U.S. front, there is mostly negative news. Let's see how much of this negative news has been priced into the market.

    1) November same store sales (bear in mind that almost every retailer had DOUBLE-DIGIT declines)

    a) Walmart up 3 percent pre-open on sales up 3.4 percent, way above the 2.1 percent expected.

    b) Below estimates: Macy's

    c) Above estimates: JC Penney , Nordstrom , Saks , Gap , American Eagle (lower guidance than analysts), Aeropostale (lower guidance than analysts)

    2) This morning, more talk of lowered earnings estimates and job cuts:

    a) Dupont down 7 percent pre-open, other commodity stocks are weak as Dupont reduces its earnings estimates on "sharply lower sales volumes." What's the issue? They sell big into the automotive and construction business, that's the issue. If you want numbers: expecting a fourth quarter loss of $0.23-$0.30 vs. expectations of a gain of $0.23. Full year 2009 now expected to be $2.25 to $2.75 versus analyst expectation of $2.80. They will cut 2,500 jobs.

    b) AT&T laying off 4 percent of the company's workforce

    c) Credit Suisse said it would cut more than 10 percent of its workforce

    d) Merck down 4 percent as it reaffirms 2008 earnings of $3.28-$3.32 (estimates $3.29); and has provided initial 2009 guidance of $3.15-$3.30 vs. analyst estimates of $3.52.

    e) Philips down 6 percent, saying its lighting and consumer business was being hurt by the global slowdown, they also will not meet their targets.

    f) Adobe reduced its revenue guidance on weak demand for its new software suite.

    Questions? Comments? tradertalk@cnbc.com

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      Wednesday, 3 Dec 2008 | 4:39 PM ET

    Winner Today? Home Builder Stocks

    Posted By: Bob Pisani

    This was a very constructive day. Star of the show was home builders, up double digits as mortgage rates dropped to 5.5 percent, down a half point. At the end of the day CNBC confirmed that the Treasury Department was considering a plan to revitalize the home market by reducing mortgage rates for new home loans. the hope: get rates as low as 4.5 percent.

    Another positive sign: not only did financials rally, but so did consumer names like Coke and McDonald's . For the past two months, most up days would see consumer stocks sell off, and vice-versa. Broad rally like this, with consumers and financials up, is an encouraging sign.

    They also drove up prices for retailers, who are anticipating a terrible series of November same store sales reports tomorrow. The question is whether the market has sufficiently discounted the bad news.

    Finally, commodity companies got real, finally acknowledging that demand had dropped significantly:

    Schlumberger : earnings below expectations

    Anadarko Petroleum : 2008 production lower due to hurricanes

    Freeport McMoran : suspended their dividend, cut capital expenditures and lowered their copper output as copper prices have dropped.

    Alpha Natural Resources : shipping less coal on steel declines

    Maybe he'll be right this time. Bill Miller says the market has bottomed! The famed Legg Mason Value Trust head says the stock market has bottomed!

    Never mind he is down more than 60 percent this year. What's really bugging traders is he made the same call--in April!

    In case you're too lazy to check it out, the headline says, "Legg Mason's Miller sees recovery for stocks; 'Worst is behind us,' famed fund manager tells beleaguered shareholders."

    That was April 23rd. Since then, his Value Trust has dropped 50 percent.

    New from CNBC.com:

    - 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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