Trader Talk

What Can Traders Hang Their Hats on Now?


Earnings season peaks this week: now what can traders hang their hat on? The close on Friday, a big earnings day, was less than stellar. Volume was poor, and two stocks were down for every one that advanced.

This, despite earnings generally above expectations (BofA was an exception) and economic news also generally better (again the Michigan Consumer Confidence was an exception).

Today, traders are noting that we are now on the crest of the wave of earnings. Big techs are finished after today with Apple, big financials are through this Wednesday after Morgan Stanley ... now what?

Bulls say selling on any disappointing trading or poor reports in the last six months has been a big mistake.


1) Low priced stock alert: Fannie Mae and Freddie Mac downgraded by Keefe Bruyette to underperform with a price target of ZERO, noting that both will need to be recapitalized, and that it is likely that the recapitalization will bake both common and preferred equity in the companies WORTHLESS.

2) Diversified manufacturer Eaton up 5 percent pre open, reported earnings of $1.21, significantly better than consensus of $0.92, revenues also higher, raised guidance $1.15-$1.25 vs. $1.06 consensus.

Since the March bottom, diversified manufacturers like Eaton and rivals Johnson Control , Parker Hannifin , and ITT have all outperformed the S&P 500.

3) Hasbro trades up 1.5 percent after its Q3 earnings beat estimates ($0.99 vs. $0.93 est.) on improved margins and the strength of its Transformers and G.I. Joe-related toys. Revenues fell 2 percent, a bit short of estimates on a 4 percent decline in U.S. sales and from negative currency impact from its international sales.

CEO Brian Goldner hinted at improving sales trends in the fourth quarter: "We believe we can grow revenues in 2009 if our consumer retail takeaway continues to improve in line with recent fourth quarter trends."

4) Gannett is up 1 percent after topping earnings estimates ($0.44 vs. $0.41 est.), benefiting from heavy cost cutting. Revenues fell a slightly better-than-expected 18 percent. Still disconcerting for the media company: advertising revenues plunged 28 percent as national ads sales fell 25 percent and classified ad revenues fell 37 percent in the quarter.

5) BB&T is down 4 percent pre-open. Although earnings beat estimates by a penny, net income fell 58 percent as the regional bank's credit loss provisions nearly doubled as it assumed the assets and deposits of failed bank Colonial BancGroup. It also noted that nonperforming assets (loans at risk of going bad) rose to 2.48 percent from 2.19 percent in the prior quarter.

5) The CME Group is reportedly in discussions to acquire the Chicago Board Options Exchange, the largest options exchange in the U.S. Crain's Chicago Business reports that a deal would be valued at up to $5 billion, with each CBOE seatholder receiving around $4 million, approximately 50 percent more than the going rate for its seats now.



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