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  Monday, 17 Nov 2008 | 4:03 PM ET

The Triple Problem For Stocks

Posted By: Bob Pisani

We have a simple problem here: no visibility on earnings has led to low volume and high volatility. It's a strange combination. In theory, the market is cheap. In theory, we are due for an oversold bounce. In reality, people are tired of playing this game. Too many failed rallies.

What's the problem? Traders believe that worse than expected a) earnings and 2) economic news is all we can expect for the next couple months.

It's going to be very difficult for the markets to hold up just above their lows with that kind of news flow. There's been a lot of buying at this level for the past two months. What do traders have to show for it? Not much.

What about earnings? Stocks typically trade at trough around 10 times forward earnings estimates. Street consensus for earnings in 2009 is about $80 for the entire S&P 500. That means the S&P should be about 800.

But wait: a lot of analysts are talking about earnings as low as $60 next year. That means the S&P could go to 600. Admittedly, these are comments from the most bearish of analysts, but those are the ones that have been most correct this year.

What about the government programs being a deal changer? That's been out for a while, and all the intervention and money hasn't stopped the market from going down.

Could we get a rally? Yes, but most traders think it is highly unlikely we will end much above 900 on the S&P at best. With that kind of modest upside, why take the risk?

Financials continued their underperformance. Banks and insurance companies have separate issues:

Bank woes:

--lack of profit

--capital raises

--dividend cutting

Insurance woes:

--capital raising

--credit deterioration

--equity market guarantees embedded in annuities

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- The Dow 30 at a Glance

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  Monday, 17 Nov 2008 | 1:20 PM ET

Everybody Into The TARP?!

Posted By: Bob Pisani

It's not just the auto and auto parts makers that want in on the TARP program! At last count, the mayors of Philadelphia, Phoenix, and Atlanta are also asking for money. Who's next? Well, the Detroit Lions are 0-10 (I kid you not)...they could use a little...something?

Kidding aside, this is a critical week for General Motors. The House Financial Services Committee will meet Wednesday to discuss a bailout plan.

For many on the Street, this is a Northern vs. Southern issue. Southerners have a large base of non-Detroit auto companies and factories, and their attitude is; why disadvantage those automakers just to help the Detroit Three, who have lost the war of ideas?

It's not as simple as that, of course, but that is a strong current running through the debate. Ideas being floated as part of the bailout include:

--early release of $25 billion in DOE loans

--TARP funds

--new proposals that are not yet clear

How much money are we talking about? JP Morgan thinks a bailout of GM alone would cost a minimum of $30 billion. They recommend that Washington should give a near-term loan to cover 1-2 quarters, but additional money should be contingent on a cut in financial debt and reducing the UAW legacy liabilities.

Regardless of what happens, you can bet than any capital injection into GM will be: 1) very dilutive for equity shareholders, and 2) come with significant concessions from debt holders.

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New from CNBC.com:

- The Dow 30 at a Glance

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  Monday, 17 Nov 2008 | 9:03 AM ET

Obama: Traders Liked What They Heard Last Night

Posted By: Bob Pisani
.More substantive is the talk of an automotive bailout; GM trading up about 5 percent pre-open. The House and Senate will be debating an interim financing solution this week, until the new administration takes control in late January. »Read more
  Friday, 14 Nov 2008 | 4:05 PM ET

The Yo-Yo Market

Posted By: Bob Pisani

Down morning, afternoon rally, late day selloff...try making sense of this. Bottom line is there was tremendous technical damage done this week. The NASDAQ hit a a closing low (5-year low) on Wednesday, while the S&P 500 hit an intraday low (also a 5-year low) yesterday.

Who's afraid of the big, bad G-20 meeting? Most traders believe little if anything truly substantive will come out of it. "Selling into government intervention has been one of the few good ways to make money this year," one trader said.

Why aren't traders impressed with the G-20?

--Bush lame-duck
--U.S. not sole leader
--Differing proposals
--20 countries make consensus difficult

Likely to be heard from the G-20 meeting: supplementing the IMF, global coordinated rate cuts, and some form of international regulation of the banking system.

For the week: Dow down 4.9 percent, S&P 500 down 5.8 percent, NASDAQ down 7.9, Russell 2000 down 9.5 percent.

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- The Dow 30 at a Glance

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  Friday, 14 Nov 2008 | 9:09 AM ET

G20 Meeting: "The Results Will Be Moderate"

Posted By: Bob Pisani

As the G-20 meets in Washington, there is a lot of parsing of commentary from attending politicians. Mexican President Felipe Calderon is probably the most realistic: "This (the G20 meeting) will need to be seen as just the starting point. There will be results, but they will be moderate."

But Nick Kounis, an analyst at Fortis Bank in the Netherlands, has the most widely distributed comment: "We will probably see further falls in output in the first few months of next year, before a gradual improvement later in the year, but we think that there will be no real recovery before 2010."

There are now "official" recessions in Hong Kong, Germany, and Italy.

    • Bernanke: Central Banks Ready to Act

Elsewhere:

1) It makes you wonder: what analysts have been doing with themselves in the past two months. Retailers, for example, have been signaling that consumer spending dropped dramatically in September and October, yet again today and last night FOUR big retailers gave guidance for the fourth quarter (November to January) that is WELL BELOW analyst estimates.

Two other trends are noticeable in retail: 1) third quarter comparable store sales were well below the same period last year, and 2) despite the bad times, several of the retailers went out of their way to say they were looking to take market share from their competitors.

a) Nordstrom said comp store sales decreased 11.1 percent and fourth quarter earnings would come in at $0.35-$0.40, vs. expectations of $0.70 (is seeking to "continue the international expansion of our brands")

b) Kohls said comp store sales decreased 6.7 percent and fourth quarter earnings would come in at $0.90-$1.05 vs. expectations of $1.22. ("we will be very competitive in order to gain market share")

c) Abercrombie is down 8 percent pre-open, said comp store sales decreased 8 percent and fourth quarter earnings would come in at $1.00-$1.05 vs. expectations of $1.57.

d) JC Penney said comp store sales were down 10.1 percent and fourth quarter earnings would come in at $0.90-1.05 vs expectations of $1.32 (will seek to "capitalize on opportunities to maintain and build market share")

2) Nokia is the most actively traded stock, down 13 percent pre-open, noting a "sharp pullback in global consumer spending." They said mobile device volumes will be lower than expected, to 1.24 billion units in 2008, vs. prior expectations of 1.26 billion units, and that 2009 volumes will be down compared to 2008.

3) Sun Micro, as with most companies, beat on the quarter but warned and said they would be laying off 15 to 18 percent of the workforce.

4) Cypress Semi is lowering its fourth quarter guidance as well.

    • Retail Sales Take Record Drop; Import Prices Tumble
    • Nokia Says Crisis Hits Mobile Phone Market
    • Sun Micro to Lay Off Up to 6,000 Workers

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New from CNBC.com:

- The Dow 30 at a Glance

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CNBC's Names in the News:

Nokia

JC Penny

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Questions? Comments? tradertalk@cnbc.com

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  Thursday, 13 Nov 2008 | 4:46 PM ET

Market's Three Day Losing Streak Ends

Posted By: Bob Pisani

This post is from CNBC producer Robert Hum:

The Dow swung 911 points today, posting its biggest trading range since October 13. The index closed 11% above its session low, erasing yesterday’s losses and snapping a three-day losing streak. Shrugging off grim outlooks by Intel and Wal-Mart , as well as a disappointing jobless claims number, investors bought heavily into the market shortly after the S&P 500 fell through its October 10 low midday.

Take a look at how some of the sectors closed above their session lows today:

Energy +15%
Financials +14%
Retailers +14%
Techs +12%
Materials +12%

After the bellKohl’sQ3 EPS beat estimates by a penny. However, its guidance of $0.90-$1.05 for the fourth quarter falls significantly below the analyst consensus of $1.23. Kohl’s shares are trading 3% lower after hours.

Nordstrom’sEPS beat analysts’ estimates by a couple of cents, but it too issued guidance far short of estimates. Its Q4 guidance of $0.35-$0.45 falls way below the consensus analysts’ estimate of $0.70. The company also expects same-store sales to decline 13%-16% in the fourth quarter.

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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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  Thursday, 13 Nov 2008 | 2:43 PM ET

What's Moving Markets Back Up

Posted By: Bob Pisani

This post is from CNBC producer Robert Hum:

The markets traded in a relatively tight range this morning. However, as the markets drifted lower midday, selling dramatically picked up when the S&P 500 fell below its intraday low of 839.80 that it hit back on October 10.

Once that technical level was crossed, the S&P 500 dropped another 20 points, to a new 5.5-year low. Weakness was broad-based, but financials were notable underperformers, with many large cap banks posting double-digit declines.

Just an hour later, the S&P 500 retraced its losses and found itself once again in positive territory, while showing signs of some buying interest. Volume picked up in the S&P 500 Depository Receipts (SPY) and was particularly strong as the market moved up. In fact, as of early this afternoon, 450 million shares of SPYDERS have already changed hands; well above the average daily volume of 380 million shares. Helping move the markets back up are notable rebounds in energy, industrials, and financials.

Despite the move up this afternoon, the Nasdaq Composite one third of the Dow’s components remain at new lows, as many of the techs and financials continue to hit multi-year lows.

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- The Dow 30 at a Glance


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  Thursday, 13 Nov 2008 | 9:31 AM ET

Wal-Mart, Intel And Their Bleak Forecasts

Posted By: Bob Pisani

This post is from CNBC producer Robert Hum:

S&P futures are flat, but they have gyrated in a 20-point range this morning. Up about 10 points early in the session, futures moved nearly 20 points lower, before bouncing off those lows following Wal-Mart’s earnings beat.

However, futures have once again have given up some of those gains, as they try to find direction this morning. Both the Dow Industrials & S&P 500 are within striking distance of their multi-year closing lows set on October 27. The Nasdaq Composite closed at a new low yesterday.

Wal-Mart’s Q3 earnings of $0.77 per share slightly exceeded the analysts’ estimate of $0.76, as sales grew 7.5% from a year ago. However, the company cut its full-year guidance due to the strengthening dollar. The dollar—as reflected by the U.S. Dollar Index—has risen 22% since its July low, hurting the repatriation of overseas profits for U.S firms with large multinational operations. The company estimates that dollar appreciation will hurt its Q4 EPS by $0.06. Preliminary Q4 guidance of $1.03-$1.07 falls below the analysts’ estimate of $1.11.

Fellow Dow component Intel also issued a bleak forecast, sending its shares down 5% pre-open. The company dramatically slashed its Q4 revenue guidance to a range of $8.7 billion-$9.3 billion from previous guidance of $10.1 billion-$10.9 billion amid “significantly weaker than expected demand.” This new guidance falls far below the analysts’ estimate of $10.4 billion. Additionally, the company expects its gross margin to be around 55%, down from its prior expectation of 59%. The company’s stock may open near a 12-year low.

    • Intel's "Dramatic" Warning—Was It Really A Surprise?

Similarly, National Semiconductor cut its sales outlook for its current quarter on declining orders. For Q2, the company expects revenues of $420 million-$425 million, down from its prior guidance of $470 million-$480 million. Analysts are expecting Q2 revenues of $461 million. The company also announced it will cut 5% of its workforce.

In other news:

Weekly jobless claims rose higher than expected to 516,000; its highest level since 2001. Three-Month U.S. Dollar Libor rose for the first time today in over a month. The rate rose to 2.14875% from 2.1325% yesterday, but still significantly off its 2.81875% high on October 10.

MBA mortgage applications rose 11.9% last week as mortgage rates fell. The 30-year fixed rate fell too 6.24% from 6.47% last week.

    • New Jobless Claims Pass 500,000 to 7-Year High

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New from CNBC.com:

- The Dow 30 at a Glance

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CNBC's Names in the News:

Intel

Wal-Mart

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Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 12 Nov 2008 | 4:07 PM ET

New Lows? We've Found Them

Posted By: Bob Pisani

Well, the "we will test the lows" question has been answered. We are again near a 90 percent downside day, where 90 percent of the volume was on the downside. New lows on the NYSE expended to the highest level in several weeks, though far below the spikes we saw in October.

The NASDAQ broke the old closing low of 1505.90. We did not break the old closing low of 848.92 on the S&P set on October 27th, but we are very close. Let's not quibble.

Financials again led the market lower. The consensus is that banks will continue to need more capital, and many feel that a new round of dividend cutting is coming. One-third of the financials in the S&P 500 (28 out of 84 companies) have already cut their dividend this year, eliminating $30.8 billion in dividends.

Yesterday an Italian bank, Intesa, dropped 17 percent after reporting poor earnings and they they would not be paying a dividend for the rest of the year.

The lesson there is that many still own bank stocks for their dividend.

Many financials hit new lows, including Citigroup ,American Express , Goldman Sachs , and Bank of America .

There was considerable debate about the G-20 meeting this weekend. Curiously several large European countries have no bank recapitalization program (France, Spain, Italy, and Ireland); many feel they will enact programs soon.

The other source of weakness was commodity stocks, with new lows in AK Steel, US Steel, International Paper, and others.

Retailers new lows: Abercrombie , Tiffany ,Limited ,Liz Claiborne ,Nordstrom ,Macy's .

Finally, even good news can't seem to help our parent company, General Electric. GE Capital announced they now had access to the FDIC's temporary liquidity guarantee program. Under the program, the U.S. Government will guarantee all GE Capital debt issued from the date they became eligible for the program until June 30, 2009. But GE still ended down about 8 percent.

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- The Dow 30 at a Glance


Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 12 Nov 2008 | 2:04 PM ET

Paulson's Effect On Markets

Posted By: Bob Pisani

The market has moved lower at Citigroup has broken below $10. Traders obviously felt it was safe to short the market ahead of Mr. Paulson's speech; the most important question now is whether they feel equally confident to short ahead of the G-20 meeting this weekend.

Bulls note this is part of the continuing process of increasing international cooperation. Bears insist nothing substantive will come out of the meeting, and even if broad principles are agreed upon it will not affect the downward trend of the markets.

If the standard pattern of the last few weeks hold, we are due for a modest rally. But the conviction is not high. Mr. Paulson's speech did advance our understanding of the TARP plan and made it clear what his priorities would be for the remaining two months of the Bush administration:

1) keep building capital;

2) help consumers get access to credit by finding a way to back up the asset-backed securities market, and

3) support mortgage modification.

Unfortunately, it raised many questions, including:

1) what will happen to the rest of the TARP money, since he made it clear before embarking on a second capital purchase program, the first one would need to be evaluated, and

2) how to have a facility to back up the asset-backed credit market when this market is regulated by the states.

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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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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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