Trader Talk

Markets: The Good News Is Bad Quarter Will End

The most important fact about this week is that it is the last week of a dismal quarter. Traders got annihilated in January, as the market went against both longs (in the first half of the month) and shorts (in the second half).

March was no better; we are simply trading at the lows of February and closing lows of January. The S&P 500 is down 9.5 year to date, the worst overall quarter since the third quarter of 2002, when it was down 17 percent.

So everyone has been buried, there are still lots of shorts around, plenty of cash on the sidelines, investor sentiment is low, and there are lots of concerns that many funds are and will be seeing redemptions. For that reason, there is considerable speculation that this will be an up week, that many funds have little choice but to commit money.

There is even a smattering of bullishness that has broken out, particularly since Bear Stearns was perceived to be a watershed event.

For example, former Countrywide Financial President Stanford Kurland, in conjunction with BlackRock and Highfields Capital, is today launching Private National Mortgage Acceptance Company, or PennyMac, to buy distressed mortgages. They are adopting the politically correct posture by claiming that their goal is to avoid foreclosures by restructuring the loans of struggling borrowers.


1) Tiffanyreported earnings above expectations, revenues in line. As with many international companies, international sales (up 21 percent) far outperformed the U.S. (up 4 percent). They went out of their way to say they again expected non-U.S. markets (ex-Japan) to outperform. Net earnings should increase 11 percent to 15 percent for the full year to $2.75 to $2.85 ($2.49 is analyst consensus estimate). Up 11 percent pre-open.

2) Sherwin Williams has lowered its first quarter and full year guidance, citing lower domestic sales and the "severity of raw material cost increases." Down 8 percent pre-open

3) Bear Stearns trading up 65 percent to $9.86 on reports from the New York Times that JP Morgan may up the bid to $10 a share; JP Morgan trading down fractionally.

4) CIT, after drawing on a credit facility last week to help its funding, is in talks with overseas banks to find additional funding, according to the Journal. Up 16 percent pre-open.

Questions?  Comments?