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Market Insider with Patti Domm Trader Talk with Bob Pisani

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  Monday, 27 Oct 2008 | 9:12 AM ET

Banks Seeking—And Getting—Capital Infusion

Posted By: Bob Pisani

Hong Kong dropped 12 percent to its lowest level in 5 years, S&P futures have swung in a 60 point range this morning, though they are well off their lows.

Metal and energy commodities are again down 2 to 5 percent, as are many commodity stocks like BHP Billiton, Total, and British Petroleum. European bank stocks like Deutsche Bank, AXA,HBC are down about 10 percent pre-open.

The Commercial Paper Funding Facility (CPFF) kicks in today. That, combined with announcements of capital infusions, means that programs are finally starting to kick in.

In fact, Assistant Treasury Secretary David Nason said on our air that $125 billion in stock purchases will occur this week after the signing of bank deals.

Elsewhere:

1) Announcements regarding capital infusions are coming fast and furious now. SunTrust Bank cut its dividend to $0.54 from $0.77, and will be selling $3.58 billion in preferred stock and warrants to the Treasury.

Fifth Thirdis trading up as they announced last night they too plan to seek a $3.4 b capital injection from Treasury.

It appears that about 20 regional banks will be getting capital infusions from the Treasury Department, on top of the nine large banks that will receive about $125 billion.

2) Earnings:

Arch Coal, like many companies, reported earnings above expectations but has guided lower for the rest of the year, to $2.30-2.50 versus prior guidance $2.50-2.85 (estimates $2.69).

Verizon beat estimates by a small amount thanks to strong wireless sales, despite worries that a slower U.S. economy would hurt spending by consumers and business customers.

3) CenturyTel Inc. agreed to buy bigger local-telephone operator Embarq for $5.82 billion. Embarq shareholders will get 1.37 CenturyTel share for each Embarq common share they own, valuing Embarq at $40.42 a share based on Friday's closing prices, a 36% premium. Embarq, you might recall, was a SprintNextel spin-off.

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- The Dow 30 at a Glance

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  Thursday, 23 Oct 2008 | 4:35 PM ET

The Seesaw Day That Was

Posted By: Bob Pisani

This post is from CNBC producer Robert Hum.

It was another seesaw day for the markets today. The Dow traded in a 552-point range, but climbed back and re-approached its session high in the last hour of trading. In the end, the Dow posted just its fourth gain of the month, finishing up 172 points on the day.

Some of Wednesday’s beaten up groups – energy, utilities, and telecom, rebounded nicely and posted some strong gains, while materials and financials continued to see some weakness. Housing stocks were particularly weak all day, falling 15%-20% following bleak reports given by Pulte Homes and Rylandlast night.

After the bell, Microsoft announced that its Q1 earnings & revenues beat estimates. However, just like many of the other companies that reported this morning, the company’s Q2 EPS guidance of $0.51-$0.53 fell short of the street’s expectation of $0.55 on the prospects of a more drawn out economic slowdown.

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New from CNBC.com:

- The Dow 30 at a Glance

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CNBC's Names in the News:

Microsoft

General Motors

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Questions? Comments? tradertalk@cnbc.com

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  Thursday, 23 Oct 2008 | 9:34 AM ET

Commodities Still Under Pressure

Posted By: Bob Pisani

S&P futures moved about 40 points off their highs of the morning, before posting a slight rebound off the lows late in the morning. They are finishing the morning session only down slightly.

Commodity stocks continue to be under pressure pre-open (down 4%-6%), as many of the commodities are weak this morning. Among them: platinum is down 7%, copper is down 5%, and gold is down 4%. The dollar is showing strength again, with the dollar index up for the seventh day in a row.

It’s another busy earnings morning today. While several companies beat estimates in the past quarter, one thing trend was clear: companies were cautious to pessimistic on the upcoming quarter.

Some of the earnings highlights:

1) UPSbeat estimates despite lower U.S. domestic volume, which fell 3.4% in the quarter. Its international operations, which posted a 7% INCREASE in volume, along with strength in its supply chain division, helped the company’s results. With greater concerns over the U.S. economy and consumer spending, the company is guiding towards the low-end of its previously-announced $3.50-$3.70 range for the full year. Analysts are expecting full-year results of $3.57. The CEO also remarked that a U.S. economic recovery may not happen until 2010.

2) Dow Chemicalbeat estimates ($0.60 vs. $0.57 est.), as it was helped tremendously by its 22% increase in prices which offset volume declines. While the company didn’t provide guidance, it warned of a “global recession through most of 2009.”

3) Potash is up 4% pre-open following its earnings beat. Higher prices helped its Q3 results to beat both analysts’ estimates and the company’s own expectations. Despite the stock’s rise in the pre-open, keep in mind the stock is down 72% from its June high, as concerns over slower global demand have significantly plagued the company. While Potash expects strong demand to continue in the long term, it does see some risk in the near term, and guides to the low end of its previous $12-$13 EPS guidance for the full year – which may come in just slightly below the analysts’ estimate of $12.55.

4) While Black & Deckeralso beat estimates for the past quarter, it sees weaker consumer confidence and slowing global economies in the next quarter. Its guides significantly below analysts’ estimates ($0.70-$0.90 vs. $1.13 est.).

Ahead of its full earnings report next week, Sony slashed its operating profit forecast by more than half for the year. The company noted it’s not only being hurt by poor sales but also but volatile currency markets. Remember, over half of Sony’s revenues are generated outside of Japan (in Europe and the U.S.)

In other news:

The Wall Street Journal reports that Goldman Sachs intends to lay off 10% of its staff (about 3,250 job cuts) in the ongoing staff reductions across Wall Street financial firm.

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New from CNBC.com:

- The Dow 30 at a Glance

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CNBC's Names in the News:

General Motors

Amazon

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Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 22 Oct 2008 | 9:08 PM ET

Trader Talk: UPS on Deck; Amazon Hit

Posted By: Bob Pisani

Australia is opening down modestly, 3.5 percent. U.S. stock futures are up.

The most important company reporting tomorrow is UPS—the good news is that falling fuel prices is gonna be a big help to them, so don’t be surprised if they beat expectations. The problem for UPS will be in Q4 guidance—don’t be surprised if it's lower than the roughly $0.96 expected due to expected lower volume. And 2009 is a big open question. The only other good news is that the stock is already reflecting considerable weakness, closing today at a historic low—remember they went public in 2003.

After the close:

1) Online retailer Amazon is also trading down about 12 percent after the close; even though earnings slightly beat expectations the company gave weak fourth quarter guidanceof $6.0-7.0 billion, below most analysts projections. CFO Tom Szkutak sounded the now-familiar refrain of "limited visibility." 43.29

2) Two big home builders continue to have problems.

After the close home builder Pulte reported a bigger loss than expected. Due to the uncertainty, they are not providing guidance for the fourth quarter. The homebuilding business worsened in the third quarter. Average selling price of their homes declined 13 percent compared to the same period a year ago. Orders were off 34 percent compared to the same period a year ago.

Pulte trading down about 10 percent to $9.50 after the close.

Rival Ryland also reported earnings below expectations—new orders declined 31 percent.

- The Dow 30 at a Glance

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  Wednesday, 22 Oct 2008 | 4:53 PM ET

Commodities Help Bring New Lows For NASDAQ, S&P

Posted By: Bob Pisani

Though it was another disappointing day, note that the Dow was down 690 points at 3:40 PM ET and then rallied 170 points into the close. The S&P 500 and the NASDAQ closed at new lows.

Despite all the worries about redemptions and forced selling, volume was notably light until the last 45 minutes. It really was more of a buyers' strike as bids simply got cancelled.

That changed a bit in the last 45 minutes, as volume picked up a bit, but 6.1 billion shares for the NYSE is still moderate compared to recent activity.

The primary impetus for the weakness was a commodity selloff: the dollar strength and global slowdown concerns created a negative feedback loop.

Commodities today:

  • Oil down 7.5%
  • Copper down 9.6%
  • Gold down 5.9%
  • Corn down 6.3%

As a result, the weakest section of the market was again commodity-based stocks and commodity based countries:

  • Energy stocks: down 10.4%
  • Commodity stocks: down 7.7%
  • Brazil: down 10.0%
  • Argentina down 10.0%

- The Dow 30 at a Glance

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  Wednesday, 22 Oct 2008 | 1:00 PM ET

Pension Funds A Worry With Down Market

Posted By: Bob Pisani

While the big story today is declining commodities and the global slowdown, there's some trader talk about the future impact that the lower stock market will have on funding obligations of corporate defined benefit plans--traditional pension funds.

Corporations are required to fund these pension funds at certain levels, and a lower market may require them to put up more money to cover any shortfall between what is paid out and what is taken in.

According to the Center for Retirement Research at Boston College, pension funds had a funding ratio of 90 percent prior to the crisis, meaning corporations were funding 90 percent of their obligations.

Today, the funding ratio is a more precarious 72 percent, so it is likely that many corporations will require higher contributions next year.

Two items here:

1) Lockheedlowered its 2009 guidance, partly on higher pension expenses next year;

2) The California Public Employees' Retirement System, the nation's largest public pension fund, said a decline of more than 20% in its assets since June 30 may require increased contributions to its fund, starting in July 2010 and July 2011.

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New from CNBC.com:

- The Dow 30 at a Glance

_____________________________

_______________________________________
CNBC's Names in the News:

Amazon

Merck

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Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 22 Oct 2008 | 9:06 AM ET

Japan's Market, Deflation Offset Interest Rate News

Posted By: Bob Pisani

A smattering of good news on the interest rate front, and a few good earnings reports, are being offset by a 7 percent drop in Japan's stock market, and continuing worries on deflation.

The good news is that Libor rates are again dropping. The dollar is rallying big again, this is continuing to put pressure on commodities, but the stress is also showing up in corporate profits. Kimberly Clark, for example, said that because of the dollar rally, currency will be a drag on fourth quarter sales comparison instead of a benefit.

While oil is again below $70, copper has become the poster child for the deflationary/end of speculation play. Copper is trading firmly below $2 a pound ($1.93); two months ago it was $3.50.

Speaking of commodities, BHP Billiton down 8 percent as it said "volatility and uncertainty" would continue in China.

Elsewhere:

1) On the good news front, McDonald'strading up on a terrific report ($1.05 vs. $0.98 expected), said October sales trends remain strong. Global comps were up 7.1 percent, U.S. up 4.7 percent. They appear to be taking shares from some of the casual dining places.

2) Boeingwas a bit light on earnings ($0.94, a decline of 33 percent, vs. $0.98 expected). Earnings were impacted by the ongoing machinists' strike and "supplier production challenges" on their wide-bodied planes. They cannot update how full year earnings will look due to the ongoing strike.

3) AT&T was also a bit light ($0.67 cents, ex-items, vs. $0.71 expected) revenues above expectations. Apple reported terrific iPhone sales, and that was also a big help to AT&T's wireless unit: they signed up a net 2 million more customers last quarter.

4) Wachoviahad a big loss ($2.23, vs. expectations of a gain of $0.02). To give some idea of how utterly lost the analyst community is on financials, consider that the range of 12 analyst estimates was from a loss of $0.54 to a gain of $0.53. And they still were far off, even the outliers.

  • Economic Stimulus Gets Fresh Push in Washington
  • Housing Bailout Will Be Next on Agenda
  • Australia Economy Set for Softer Landing: RBA Governor
  • More Interest Rate Cuts Seen in Australia
  • Key Lending Rates Drop in US
  • 5) Drilling giant Baker Hughes echoed Schlumberger when it said that they expect capital expenditures in North America by big oil companies to decline due to tight credit and oversupply of natural gas. They do expect spending outside of North America to continue to expand, although more modestly than recent years.

    6) Housing: MBA says mortgage rates fell to 6.28 percent from 6.47 percent; we have been moving between 6 and 6.5 percent. The bad news is that purchases fell 10.9 percent to the lowest level since October 2001.

    7) Finally, Samsung has withdrawn its offer to buy SanDisk, saying "we are no longer interested in acquiring SanDisk at $26 a share" (currently trading at $14.76). Meaning...they would buy it somewhere below $26?

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    - The Dow 30 at a Glance

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      Tuesday, 21 Oct 2008 | 12:01 PM ET

    Why Today Is So Important

    Posted By: Bob Pisani

    Here is one of the more important trading days we have had in this tumultuous month. Any close that is near break even or positive would be a sign that stocks are discounting a lot of bad news.

    Today, we get generally poor guidance on 2009 and the markets do...nothing. The VIX, down 25 percent yesterday (biggest drop in years) does nothing. Dow moves in a 150-point range, it's narrowest range in weeks.

    Don't let the quiet trading fool you: beneath the turmoil the market is struggling to find new leadership. It has not yet clearly materialized, but that's because we are in an uncertain transition.

    Just because the big names--DuPont, Caterpillar, Texas Instruments, American Express, Lockheed Martin, have all been out trying to talk down 2009 in the last 24 hours doesn't mean these stocks are dead in the water.

    The markets have already discounted a doozy of a recession. AmEx was at a 10-year low, DuPont at a 13-year low, Lockheed 2 year low, Texas Instruments5 year low, get the point?

    Yes we are down, but not much, midday. Bulls will crawl out of their hole if we get anywhere near break even at the close.

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    New from CNBC.com:

    - The Dow 30 at a Glance

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    Questions? Comments? tradertalk@cnbc.com

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      Tuesday, 21 Oct 2008 | 9:07 AM ET

    Market Test--Can It Move Up On Bad Earnings?

    Posted By: Bob Pisani

    Futures are down in reaction to the poor earnings guidance we have seen from Dupont,Texas Instruments, Sandisk, and Sun Micro, among others, but the swing in the futures pre-open has been only 18 points, well below the 50-point spreads we have seen in the past few weeks.

    Overnight, three month Libor dropped below 4 percent to 3.83 percent. The dollar index rallied to a new 18 month high, which is hurting commodities again. Copper is down 5 percent this morning.

    While lower copper is good news for many industries like home builders, it is a huge problem for a firm like Freeport-McMoran, which this morning reported earnings and revenues a bit below expectations.

    They did not give guidance, but noted "significant uncertainty" about the near-term price outlook for copper and gold. Down 6 percent pre-open.

    "Significant" is an understatement. Freeport said copper prices averaged $3.49 a pound during the third quarter, dropped to $2.89 at the end of the quarter, and this morning is $2.01.

    Other than earnings, the most important event today is that the Lehman credit default swaps are supposed to be paid off--we have no idea how much was actually bought as insurance, how much as speculation, nor the exposure of the big firms.

    On earnings:

    1) Caterpillarmissed earnings, revenues above expectations, however stock is up because they reiterated 2008 full year guidance (about $6.00), however the expectations for 2009--flat with 2008--are a bit below expectations of $6.15. CEO Jim Owens said, "the timing and strength of the recovery are very uncertain."

    2) Dupont beat, but lowered guidance for the full year (to $3.25-$3.30, from $3.45-$3.55), based on weakened demand in North America and Europe, which is two-thirds of their business. Down 5 percent pre-open.

    3) MMMbeat, full year estimate is $5.40-$5.48, in line with estimates of $5.45. This was a good report given the environment, with continued growth in international operations. Up 2 percent pre-open.

    4) Lockheed-Martin beat, and their guidance for the rest of the year is above their prior guidance, but 2009 guidance is below expectations. Down 5 percent pre-open.

    4) American Express beat expectations and is trading up about 4 percent pre-open. Mastercard and Visa are both trading up in sympathy. But don't get too excited: AmEx was at a 10-year low on Thursday, so this is just a small bounce from a dramatically oversold level. Amex saw a further slowing in October and said the difficult economic environment will extend into 2009.

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    - The Dow 30 at a Glance

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    Questions? Comments? tradertalk@cnbc.com

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      Monday, 20 Oct 2008 | 8:41 PM ET

    After the Close, a Series of Lowered Outlooks

    Posted By: Bob Pisani

    There was good news during the day, but several companies provided very poor guidance after the close.

    So here’s a great test of the markets: can stocks stabilize on bad news?

    Bad news after the close:

    --many companies reducing Q4, 2009 estimates

    --weak tech reports from Texas Instruments, Sandisk, and Sun Micro

    The good news:

    --credit markets improving

    --less signs of liquidation

    --buying interest perks up

    --stocks (and traders!) calmer

    Texas Instruments reported earnings and gross margins below expectations and guided lower on both revenues and earnings . Wireless is the weak link here, the CEO said he saw continued weakness in chip sales through the first quarter of 2009. New orders were "declining rapidly" in all areas. Down 6 percent after the close.

    Sandisk, which makes data storage products based on flash memory, reported a loss ($0.59) well beyond expectations (loss of $0.27) as price cuts appear to be cutting into margins. Revenue guidance for the fourth quarter is substantially below estimates. They are making substantial cuts in manufacturing investment. The company said they were still open to negotiations with Samsung.

    More from CNBC:

    Sun Micro guided revenue for their first quarter slightly below expectations ($2.95-$3.05 b vs. expectations of $3.14 b). Down 10 percent after the close.

    American Express beat expectations and is trading up about 6 percent after the close. Mastercard and Visa are both trading up in sympathy. But don't get too excited: AmEx was at a 10-year low on Thursday, so this is just a small bounce from a dramatically oversold level. Amex saw a further slowing in October and said the difficult economic environment will extend into 2009.

    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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