Trader Talk

Wednesday's Futures Are Lower


Futures are lower, after retail sales came in lower than expected, and after weakness in Europe due to poor earnings news from Deutsche Bank. The German bank expects a loss of about $6.4 billion. Trading down 10 percent pre-open.

European banks are also under pressure because Morgan Stanley said HSBC could cut its dividend in half, and may need to raise $30 billion in capital. "We now expect earnings to fall more sharply in 2009, with no recovery until 2011 at the earliest," Morgan Stanley said. Down 9 percent pre-open.


1) Nortel and several of its affiliates have filed for bankruptcy in the U.S. Trading was halted here and in Canada.

2) Tiffany down 7 percent pre-open, said sales declined significantly in their U.S. stores and to a lesser degree in Asia-Pacific and Europe. Worldwide net sales in the holiday period declined 21 percent.. Comparable U.S. store sales decreased 35% with similar declines experienced in the New York flagship store and across the branch stores.

As bad as that is, it is within the range of 25 to 35 percent decline that the company projected.

3) The softness in commodity markets is affecting more than just Alcoa . Soybean giant Bunge down 11 percent pre-open, lowered its 2008 earnings estimate to $7.70 (consensus was $9.47) and 2009 guidance, to $6.90 to $7.60 (analyst consensus estimate is $7.89). Soybean prices have dropped about 40 percent since July.

4) Under Armour down 19 percent as they gave preliminary earnings well below expectations.

5) Good and bad news on housing. Good news: Mortgage Bankers Association said the 30 year mortgage ate fell to 4.89 percent from 5.07 percent last week, its lowest level since they kept track dating back to 1990. The bad news: while refinance applications rose 25.6 percent, applications to purchase a home fell 14.1 percent to a one month low. Spring home buying season starts in about six weeks.

6) Citigroup down 12 percent as the Smith Barney-Morgan Stanley deal was officially announced. The advantages: unlocking $6.5 billion in capital. Disadvantages: a) Citi sells a crown jewel under duress, and b) "significant" integration risk (according to Deutsche Bank) (2 brands, 2 management teams, 2 parent companies).

Oppenheimer's Meredith Whitney: "There is no other way to view this move, in our opinion, than as a way for C to raise cash prior to its 4Q earnings release."



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