Trader Talk

Can The Rally Last?


The four-day rally in the S&P 500, the first since November, is in jeopardy today.

Futures weakened further as December durable goods came in weaker than expected, and November saw a huge revision downward (from a decline of 1.5 percent to a decline of 3.7 percent).

Jack Welch was on our air this morning noting that the difference between this slowdown and slowdowns in 1990-91 and 1980-82 was that this downturn has virtually no visibility: business leaders can't figure out what business is going to look like in February, let alone the second half of the year.

Jack Welch on the Economy

How bad is visibility? Look at Black and Decker: down over 10 percent this morning, as they gave guidance for the first quarter of $0.05 to $0.15. Analyst consensus estimate is $0.74, with full year guidance just as far off. That is bad visibility. Power Tools and Accessories sales decreased 13 percent in the fourth quarter.

If that wasn't enough, the strong dollar would also have an unfavorable impact on them (as it will for other companies)


1) The yo-yo in banking stocks continues, with European banks like Lloyds, UBS , Barclaysand others down 6 to 20 percent, after an impressive multi-day rally. Daily double-digit moves in these stocks in both directions only enhances the Street opinion that these are short-term momentum trades.

2) AutoNation CEO Mike Jackson was on our air this morning. They had a 40 percent decline in sales last quarter (vs. industry decline of 49 percent). Visibility here is poor too, unless and until banks show a greater willingness to lend.

3) Allstate down 16 percent big as S&P lowered its ratings on Allstate, following a big capital loss of $1.9 billion in the quarter

4) Ford reported a loss roughly in line with expectations

5) Illinois Tool Works down 6 percent on poor guidance ($0.26-$0.42 vs. expectations of $0.47, also weak guidance for the full year).

6) Colgate at least gave upbeat commentary, reporting record earnings of $1.00 ($0.98 estimate) saying they were "comfortable" with analyst estimates for the first quarter and full year.

7) Today the NYSE launches the New York Block Exchange (NYBX), yet another entry into the "dark pools" of order flow. For those of you not following execution trends, "dark pools" are large block trades (over 10,000 shares) executed anonymously, usually executed away from central exchanges. The NYBX joins several other exchange-owned dark pools; it allows traders with blocks to trade anonymously across the entire NYSE order book. In other words, floor participants do not know where the order came from. Executions are printed on the NYSE tape.



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