GO
Loading...

Enter multiple symbols separated by commas

Market Insider with Patti Domm Trader Talk with Bob Pisani

More

  Friday, 7 Nov 2008 | 9:19 AM ET

Rally Today—Or Not—With Jobs Report?

Posted By: Bob Pisani

The October nonfarm payrolls report was bad, but not as bad as some expected. A decline of 240,000, versus expectations of 200,000, but some were expecting a much greater decline, to 300,000. And ultimately it may well be revised there: September was revised downward to 284,000, versus initial numbers of 159,000—a significant revision.

When all was said and done, futures are relatively flat. The game plan for the past two days has been to short the market going into the jobs report, and if it was not dramatically worse to push a modest rally. We'll see. The Dow and the S&P 500 are down about 10 percent in the past two days.

Elsewhere:

1) Fordup 5 percent, after announcing a greater loss than expected. They are cutting 10 percent of its salaried staff, and cutting production as well. Ford burned through $7.7 b in cash this quarter, ending with $29.6 b in cash and credit on hand. Although they say they have enough cash to get through next year; the question is how much aid the government will provide.

GM's numbers come out at 10:30 AM ET.

2) A miracle: someone raised guidance! Construction and engineering giant Fluorbeat expectations and guided higher for the rest of the year, as well as next year. Remember, they get a large amount of their revenues from the oil and gas industry.

3) Wells Fargo did get its capital raising done: $11 billion. That's 407.5 million shares for $27 each, 6 percent below the Nov. 6 price of $28.77. Wells down 7 percent p

4) Insurance giant Genworthsuspended its common stock dividend.

5) There is considerable talk that federal officials may change the terms of the $85 billion loan to American International Group. They are burning through cash at a lot faster rate than expected.

  • Is Your Firm Laying Off?
  • Cuts Hit White, Blue Collars
  • Pros: S&P Going to 1,100
  • Stocks Putting Lows to Test
  • US Economy 'Has Fallen off a Cliff': El-Erian
  • _____________________________
    New from CNBC.com:

    - The Dow 30 at a Glance

    _____________________________

    _______________________________________
    CNBC's Names in the News:

    General Motors

    Ford

    _______________________________________


    Questions? Comments? tradertalk@cnbc.com

    »Read more
      Thursday, 6 Nov 2008 | 4:08 PM ET

    What We Need: No More Surprises

    Posted By: Bob Pisani

    So for the past two days the short-term trade has been: fade the market in anticipation of a nonfarm payrolls report below even the loss of 200,000 jobs expected, then go for a modest rally in the middle of the day Friday.

    It makes sense, but regardless the economic and earnings data has been below expectations across the board. With auto sales at a 25-year low, major auto execs in Washington are pleading for help, and with many retailers with double digit same store sales declines in October, there is little good news.

    For the second day, a broad swath of stocks have been down 4 to 10 percent. There is a slight defensive tone to the market, with less intense declines among healthcare and consumer stocks.

    Elsewhere, the damage is pretty even, but two things should be noted:

    1) some large financials (Citi, BofA,Goldman) are again at or near new lows;

    2) commodity stocks are again underperforming the market: steel stocks like US Steel are down nearly 23 percent in two days (!!), Alcoa down 18 percent and Freeport down 18 percent,. Energy stocks have had similar declines, with Massey Coal down 22 percent, EOG down 8 percent.

    What we need to have happen is this: the end of surprises. At this point, analysts and economists are going to cut their numbers aggressively (again!) and at some point, hopefully in the first quarter, they will overshoot and the economic and earnings numbers will again be better than expected.

    By then, the stock market will have already sniffed out the recovery.

    _____________________________
    New from CNBC.com:

    - The Dow 30 at a Glance

    _____________________________

    _______________________________________
    CNBC's Names in the News:

    GM

    Ford

    _______________________________________


    Questions? Comments? tradertalk@cnbc.com

    »Read more
      Thursday, 6 Nov 2008 | 3:07 PM ET

    U.S. Automakers: Their Moment Of Reckoning

    Posted By: Bob Pisani

    The Big Three auto makers are meeting with the House leadership today, and they are going to be presenting scary numbers. GM in particular is likely burning through their cash horde of $25 b at a much faster rate than the $1 billion a month projecting a short while ago.

    This is the moment of reckoning for these companies. I know no one on the Street who thinks GM and Chrysler, or their suppliers, will survive in the form and structure that they currently exist in.

    In addition to having GMAC become a bank holding company (hence getting a direct infusion into the TARP), GMis also likely to be seeking the ability to sell auto loan assets directly into the TARP, which would help support the financing mechanism that has essentially collapsed.

    Beyond this assistance, there are some very hard questions that need to be addressed. The big one is: does government "bailouts" of any of the Big Three auto makers really solve the problem?

    What the Big Three have is:

    1) cost structures that do not make sense, and

    2) a collapse in volume: vehicle sales are at 25-year lows.

    Most traders and analysts believe there is little if any equity value in GM.

    What is likely to emerge here, with or without government assistance, is a much smaller GM. Instead of 25 percent of the market, perhaps 15 percent. That would still cost jobs (they have been shedding jobs for 8 years, by the way) but it might be their best shot at survival.

    What about Chrysler? Remember 1979? Lee Iacocca? This would be the second bailout.

    While a merger between Chrysler and GM may sound like a good idea politically, what would it accomplish:

    1) there would still be enormous liquidity problems;

    2) they would still need to cut product lines and cut jobs;

    3) the government would likely throw huge amounts of money into the restructuring costs.

    How many jobs would be saved by an additional $30 billion or larger investment by the government into a "bailout merger"? How many jobs would the government save to force a merger? Chrysler has probably 90 percent of its sales in North America; the vast majority of that is trucks that no one is buying in the quantities they are manufacturing.

    There is no alternative to working down excess capacity.

    _____________________________
    New from CNBC.com:

    - The Dow 30 at a Glance

    _____________________________


    Questions? Comments? tradertalk@cnbc.com

    »Read more
      Thursday, 6 Nov 2008 | 12:03 PM ET

    Feelling Lucky? Try These New ETFs

    Posted By: Bob Pisani

    You would think risk appetite would be declining right now, but fund company Direxion has just launched a new series of Exchange Traded Funds (ETFs) that allow you to bet three times the performance or three times the inverse of major sectors of the market.

    Here's the funds:

    Tied to Russell 1000 (large cap index)

    Large Cap Bull (BGU), 3x performance

    Large Cap Bear (BGZ), 3x inverse performance

    Tied to Russell 2000 (small cap index):

    Small Cap Bull (TNA), 3x performance

    Small Cap Bear (TZA), 3x inverse performance

    So if, for example, the Russell 1000 was up 2 percent, and you owned the Large Cap Bull, your profit would be 6 percent. Conversely, if the Russell 1000 was down 2 percent, and you owned the same fund, you lose 6 percent.

    It works the same for the Bears in reverse. If the Russell 1000 was down 2 percent, and you owned the Large Cap Bear, you make 6 percent. But if the Russell 1000 was up 2 percent and you owned the same fund, you would lose 6 percent.

    This is the first time a 3x performance ETF has been launched; there are already several 2x performance.

    They have also announced that they will be launching Energy and Financial Bull and Bear ETFs, that will also allow you to bet three times the performance or three times the inverse of the Russell 1000 Energy and Financial Services sectors.

    Feel like making a big bet?

    _____________________________
    New from CNBC.com:

    - The Dow 30 at a Glance


    Questions? Comments? tradertalk@cnbc.com

    »Read more
      Thursday, 6 Nov 2008 | 11:34 AM ET

    Wall Street Still Searching For A Bottom

    Posted By: Bob Pisani

    Most traders believe there is going to be at least one other retest of of the October lows of about 840 on the S&P 500, but when and how do we know if that bottom might hold? A number of traders are looking for simple, classic technical signals.

    Here's one: retesting lows on improving internals. A number of traders noted that when we hit the lows on the S&P 500 in the middle of October, new 52-week lows spiked to levels never seen. But when we got close again to another low on the S&P, on October 24th, new lows had dropped off dramatically.

    So, for example, if we go back to 840 on the S&P, and new lows are again at fairly low levels, that would be a good sign that we might hold there.

    The "next leg down" argument. Bears argue that we will hit the old lows, and pass them. The bear argument is the "next leg down." The next down leg is a dramatic spike in auto loan and credit card delinquencies.

    The bulls argue that this information has been widely telegraphed on the Street already. Regardless, this argues for a retest sooner than later.

    _____________________________
    New from CNBC.com:

    - The Dow 30 at a Glance


    Questions? Comments? tradertalk@cnbc.com

    »Read more
      Thursday, 6 Nov 2008 | 9:16 AM ET

    Econ, Earnings Numbers End Up Worse Than Expected

    Posted By: Bob Pisani

    The Bank of England pulled off a stunner by cutting interest rates 150 basis points to 3 percent. The European Central Bank cut by 50 basis point and the Swiss cut rates by 50 basis points.

    The most important fact about the economic and earnings data in the past couple weeks is that it has generally been worse than the already lowered numbers predicted. We have seen this again this morning, with the exception of the Productivity number.

    Retail sales. Last week analysts began furiously cutting estimates on October same store sales. Today, with a few exceptions (Like teen retailers Bucket and Hott Topic), retail sales are below expectations.

    Limited,for example, was expected to have sales down 6.2 percent, but it came in down 9 percent.

    A few even reported double-digit declines: Abercrombie (down 20 percent), Gap(down 16 percent), Talbots(down 13.9 percent), Nordstrom (down 15.7 percent).

    Even discounters were not exempt. Costco saw sales DECLINE 4.3 percent, where a gain of 1 percent was expected, and Targetwas down 4.8 percent, below expectations.

    Wal-Martdid see sales up 2.4 percent , better than the expected 1.6 percent gain. U.S. comparable store sales for the four-week November period are expected to be between one and three percent.

    Company earnings/guidance disappoints as well. After the close, several companies confirmed that business slowed significantly in September and October.

    1) Overseas, downbeat earnings reports from Toyota, Axa, and Adidas. Toyota was talking about the biggest profit drop in 18 years, and noted the recent strength of the yen was also eroding overseas profits.

    2) Cisco saw a 9 percent decrease in October orders year over year. On the conference call, CEO John Chambers said he is now anticipating a decrease in revenue of 5 to 10 percent in the current (second) quarter. Chambers said it was the most difficult time in his career.

    3) As if car makers didn't have enough problems, rental car company Hertzreported earnings well below expectations ($0.33 vs. $0.52 expected). Demand for rentals is down, pricing is down, and prices for the used cars are down. The company said it will not meet its guidance and is suspending its guidance. Down 10 percent pre-open.

    4) News Corp down 11 percent after the close cut its full year outlook on the strength of the dollar and as advertising revenues continued to decline in the television industry.

      • Jobless Claims Take Small Drop; Productivity Falls

    _____________________________
    New from CNBC.com:

    - The Dow 30 at a Glance

    _____________________________

    _______________________________________
    CNBC's Names in the News:

    Yahoo

    Toyota

    _______________________________________


    Questions? Comments? tradertalk@cnbc.com

    »Read more
      Wednesday, 5 Nov 2008 | 4:07 PM ET

    Global Economic Slowdown Anything But Over

    Posted By: Bob Pisani

    Here is your little kick-in-the-pants reminder that the global economy is in bad shape and not getting better any time soon. And it doesn't give a damn that every single person on Wall Street (and at CNBC) is exhausted and wants a few days off.

    I can make excuses for the selloff, if you want: 1) the volume is light, 2) there has been no concerted wave of selling, just buyers walking away, and 3) we have had a rally for the last week and a half and can't expect to go too far.

    The selloff was fairly uniform: most stocks were down 3 to 7 percent. The initial decline was led by commodity stocks, led by ArcelorMittal, which announced they were cutting steel production. Then late day financials led the selloff with Citiand Bank of America leading the Dow down.

    The economic news has not only been bad, it has been worse than expected (ISM Services & Manufacturing, for example), and the news for the rest of the week (October retail sales, initial jobless claims, and nonfarm payrolls) stand a good chance of being worse than the already lowered numbers.

    In other words, we are RIGHT NOW in the thick of what is likely to be at least several months of just plain lousy numbers.

    The bulls believe that we can start talking about a turnaround in the second half of 2009. Why so soon? Because bulls argue that the tidal wave of global financial aid is going to be a lot bigger help than some people think--that the aid donors will overshoot on the generous side and prime the pump in a big way.

    The bears find this laughable. Their position is that we will soon challenge the October lows--perhaps before the end of the year, but I often hear January mentioned as a good month to hit new lows.

    January, because 1) it is supposed to be an up month and because it will be down it will break the bulls' heart (as it did this year) and 2) by then the next leg of the problem (credit card and auto loan defaults) will have manifested itself and it will be clear that these problems are deeper and more widespread than obvious now.

    What this means is that even bulls and bears agree that it will be tough to significantly move the markets forward for the rest of the year. Most stock traders think we will remain somewhere in the range we have been in recently--850 to 1,000 on the S&P 500.

    I know only a few brave souls who think we will end the year at 1,200; I know several who think we could be at 800.

    _____________________________
    New from CNBC.com:

    - The Dow 30 at a Glance


    Questions? Comments? tradertalk@cnbc.com

    »Read more
      Wednesday, 5 Nov 2008 | 2:44 PM ET

    Get Ready—Same Store Retail Sales Will Be Awful

    Posted By: Bob Pisani

    Hold your nose: tomorrow's October retail same-store sales will be awful. I know everyone thinks the Downer of the Week will be nonfarm payrolls on Friday, but before that brace yourself for double-digit declines in some retail same-store sales.

    Last week, analysts finally woke up and began aggressively cutting same store sales. As always, they have been late and the stock market has moved ahead of them.

    While discounters will probably post positive comps (with Wal-Martup 1.6 percent), and drug stores should post low single-digit gains, the rest of the retail biz is a mess: there should be notable declines in department stores (with double-digit declines expected at JC Penney, Dillards, Nordstrom, and Saks), Apparel (with most down mid-single digits) and even teen retailers (Abercrombie estimated down 14 percent, for example).

    There's even talk that overall year-over-year same store sales could be negative, which would be the first time that has happened since 2000.

      • Private Sector Cuts Jobs; Planned Layoffs Jump

    _____________________________
    New from CNBC.com:

    - The Dow 30 at a Glance


    Questions? Comments? tradertalk@cnbc.com

    »Read more
      Wednesday, 5 Nov 2008 | 1:13 PM ET

    Obama "Bounce": Why It's Not Bouncing

    Posted By: Bob Pisani

    Those of you who thought the "Obama bounce" would triumph over "the economy" or "profit taking" today must be rather unhappy.

    The average stock is down about 2.5 percent midday, with particularly weakness in some commodity and energy names. ArcelorMittal's announcement they would be cutting steel production is weighing on steel, iron ore, and coal companies.

    But it doesn't stop there: financials and pharma have been weak, and recently tech stocks have also moved down. House Speaker Nancy Pelosi, not surprisingly, threw her support behind an economic stimulus bill midday as well.

    Stocks have had a nice run in the past 7 trading days—the S&P is up about 15 percent from its lows last week. Many beaten up groups like REITs, retail, restaurants and hotels have had nice moves up.

    What the market is saying here is, not so fast. There is a ceiling on a market rally due to the horrible economic numbers. Most traders believe it is highly unlikely the S&P will close the year out near 1,200. The majority think we are likely to be slightly higher from current levels.

      • Private Sector Cuts Jobs; Planned Layoffs Jump

    As for the Obama bounce: most stocks that were supposed to benefit from his election (solar, hospitals, infrastructure) are also down today, in many cases just as much as stocks that were supposed to be hurt by his election (defense, pharma, big oil, tobacco).

    _____________________________
    New from CNBC.com:

    - The Dow 30 at a Glance


    Questions? Comments? tradertalk@cnbc.com

    »Read more
      Wednesday, 5 Nov 2008 | 9:15 AM ET

    California Prop Defeat "Hurting" Alternative Energy Stocks

    Posted By: Bob Pisani

    Futures are down, but don't read this as a refutation of President-elect Obama. The S&P 500 has moved 11 percent in the past week, and many traders went home short on simple profit-taking.

    Germany passed a $64 billion economic stimulus package today, which includes funding for infrastructure projects. Italy is working a plan as well. Expect the U.S. to follow. Libor down 18 straight days, near 2.5 percent. The ADP report on private jobs showed a bigger loss than expected. Commodities are mixed, gold is flat but gold stocks like Goldcorp and Yamana are weaker.

    Elsewhere:

    1) Obama is a big backer of alternative energy, but alternative energy stocks like Clean Energy,Suntech Power, Yingli Green, and Evergreen Solarare trading down this morning.

    That's because California voted down Proposition 7, forcing California's electric utilities to get 50 percent of their power from alternative energy by 2025, which would have been an increase of the current goal of getting 20 percent by the end of 2010. Another proposition would have offered rebates for cars that offered alternative fuels; it too failed to pass.

    2) ArcelorMittal, the world's largest steelmaker, down 17 percent, is cutting production as prices fall. That has implications for coal stocks, as any pullback in steel production will reduce demand for coking coal. U.S. Steel down 6 percent as well.

    3) Time Warnerup 3 percent, they beat however they lowered full year profit forecasts by a few cents, perhaps less than expected.

    4) Libor may be going down, but mortgage rates remain stubbornly high, with 30-year fixed rate mortgages going to 6.47 percent last week, close to the highs we saw last summer. This is hurting the purchase market and killing the refinance business.

    _____________________________
    New from CNBC.com:

    - The Dow 30 at a Glance


    Questions? Comments? tradertalk@cnbc.com

    »Read more

    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.

    Wall Street