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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

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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

Tribune

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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.

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CNBC's Names in the News:

Walmart

General Motors

Ford Motor

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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.

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CNBC Investor Tools:

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CNBC's Names in the News:

General Motors

DuPont

AT&T

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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.

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- The Dow 30 at a Glance


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  Wednesday, 3 Dec 2008 | 1:28 PM ET

Exxon's Amazing Stat: Market Cap Of $400 Billion

Posted By: Bob Pisani

ExxonMobil by itself is now a larger company than Citigroup,Bank of America, JP Morgan, Wells Fargo,Goldman Sachs,Morgan Stanley and Bank of New York COMBINED.

That's right, COMBINED. Exxon market cap: $400 billion. All the above financials combined: $390 billion.

ExxonMobil is the largest stock in the S&P 500. Wal-Mart, the nearest competitor, is a little more than half that size. ExxonMobil has been notably outperforming the market recently. Since early September, Exxon has been up about 5 percent, while the S&P 500 has been down 30 percent.

Financials have been down 45 percent in that time period. Why is Exxon doing so much better than the rest of the market, and even better than energy stocks in general (the S&P energy sector is down about 25 percent in the same period)?

1) Safe haven

2) Great balance sheet

3) Not going anywhere

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  Wednesday, 3 Dec 2008 | 9:14 AM ET

So, One Government Rescue Program Working?

Posted By: Bob Pisani

Who says consumers don't watch interest rates? Mortgage rates dropped to 5.47 percent at the end of last week, down from 5.99 percent, according to the Mortgage Bankers Association. Applications to purchase a home rose 38 percent, while applications to refinance an existing loan rose 203 percent.

Here, at least is a tangible benefit from a government program, this one from the Fed's decision to buy GSE debt and GSE-guaranteed mortgage backed securities (MBS).

    • US Mortgage Applications Surge by Record Amount

Elsewhere:

1) Constellation Group up 20 percent pre-open after Electricite de France made a bid for 50 percent of the company's nuclear power assets. The offer is $4.5 billion, implying a value of $52 a share for all of Constellation (price closed at $25.15 yesterday). EDF already owns 9.5 percent of the company. A remarkable bid, considering Warren Buffett is supposed to be buying all of Constellation for $4.7 billion, or $26.50 per share.

2) Freeport McMoran down 17 percent pre-open as they suspended their dividend, cut capital expenditures and lowered their copper output. Copper prices have gone from $3.75 a pound to $1.50 a pound in the past four month, an unprecedented decline. Other metal companies, including steel companies, are trading down.

3) US Air is illustrative of the good and bad news coming from the airlines: the bad news is that traffic is down, despite capacity cuts. The good news is that lower jet fuel costs "will more than offset the decline in demand that we are currently anticipating," says US Airways President Scott Kirby.

    • November Layoffs Hit Highest Level in 7 Years

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New from CNBC.com:

- The Dow 30 at a Glance

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CNBC's Names in the News:

Company/ticker No. 1

Company/ticker No. 2

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Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 2 Dec 2008 | 4:10 PM ET

A Bottom Or Not? Pick Your Analyst

Posted By: Bob Pisani

A somewhat quiet, low volatility day, with strength in financials, industrials and materials.

GM's plan they will be presenting to Congress is now up on their web site . Increased production of fuel efficient vehicles, and their plans entail rationalizing brands, models and dealerships, reducing costs, restructuring their capital structure, consolidating manufacturing facilities, as well as models and dealerships. They want $12 billion in loans, they will draw down $4 billion this month. They also want a $6 billion line of credit to provide a cushion if the "severe market downturn" persist.

November vehicle sales— ugh! :

GM down 41.3%
Ford down 31%
Honda down 31.6%
Toyota down 33%

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  Tuesday, 2 Dec 2008 | 11:55 AM ET

There's No Sign Of A Bottom Yet

Posted By: Bob Pisani

Traders are still mulling the implications of yesterday's sell-off. According to Lowry, the oldest technical analysis service, since September:

--There have been six 90 percent upside days (where 90 percent of the volume went to stocks on the upside)

--There has been no follow-through: each of those days has been followed by 90% downside days.

This is not an encouraging sign. One of the patterns for a market bottom is that higher prices (like you get on a 90 percent upside day) are followed by higher volume, higher demand, and higher prices.

That is not happening. We get a move up, like last week, then massive selling into it.

What does this mean? Lowry said it best: "Sentiment continues to see rallies as opportunities for selling rather than as harbingers of further gains."

We're not even getting help from insider buying. According to TrimTabs, insider buying is the lowest since August. What does this mean? It means insiders think it is too early to buy.

If it's any consolation, insider selling is also down.

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- The Dow 30 at a Glance

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  Tuesday, 2 Dec 2008 | 9:20 AM ET

Traders "Betting" Big 3 Get Bailout Money

Posted By: Bob Pisani

While most financials are trading up, as are most commodity stocks (gold stocks are up 6 percent or more), there are a couple of outliers trading down.

In financials, Goldman Sachs is trading down 5 percent on a Wall Street Journal report that Goldman could report a loss for the quarter much greater than anticipated ($5.00, vs. expectations of a loss of $0.62) on losses on distressed investments.

In commodity stocks, fertilizer giants Mosaic and Potash both trading down, as Mosaic said fertilizer sales have been soft due to lower grain prices. Mosaic withdrew their sales volume guidance for phosphates and potash.

Elsewhere:

1) GE (our parent) is updating their guidance on GE Capital, and earnings. Earnings are trending toward $0.50-$0.52, the low end of previous guidance of $0.50-$0.65. Reaffirming their plan to maintain their dividend of $1.24 (now has a yield of 8 percent). They are expecting 10 percent earnings growth in the future. For GE Capital, they are lowering their leverage ratio and their commercial paper balance.

2) In consumer products, Palm is trading down as they guided revenues well below expectations for the current quarter and said they were laying off people. Palm was down 21 percent yesterday, down again this morning.

3) How tough is retail? Two companies abandoned parts of their forecasts for 2009, joining many other companies:

a) Sears reported a loss much wider than expected; its EBITDA forecast for the second half is no longer relevant due to "severe conditions in the economy"

b) Staples reported earnings roughly in line with expectations, but is not providing any sales guidance for the fourth quarter due to the volatile environment

4) Lots of debate on trading desks about what plans the Big Three auto makers will present to Congress. One thing's for sure: November vehicle sales due today will be ugly. Estimates are for seasonally adjusted annual sales of about 10.5 million, compared to 16 million in November of last year.

As for the plans, the bet is that emergency aid will be extended, but any restructuring or pre-packaged bankruptcy will wait until later.

Most feel GM will propose eliminating one or more brands, consolidate dealerships, and cut healthcare contributions.

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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 Electric

Bank of America

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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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