Trader Talk

Traders Digest Election Results

Politics the hot topic on trading desks this morning. Democrats lost gubernatorial races in Virginia and New Jersey.

TraderTalk is that: 1) this will change the tenor of the healthcare debate, and 2) put more onus on the Fed to help the economy because the fiscal side of economic assistance—another stimulus plan, for example—is now out the window.

The Fed statement really matters now. The key phrase for the Fed decision revolves around interest rates and whether the Fed will keep language promising to keep rates exceptionally low "for an extended period." Commentary on the economy will also be watched--some comment on mild improvement is expected.


1) IPOs: another one bites the dust. Aviv REIT, which focuses on ownership of healtchare properties, pulled its $300 million IPO, which was supposed to price last night. This, a few days after international natural gas company AEI also shelved its $800 million IPO. The problem: picky buyers looking for lower prices, and a change in market sentiment.

Next test for the IPO market: tonight, when Hyatt (H) is expected to price 38 million shares at $23-$26 (about $931 million).

2) Kraft is down 2 percent pre-open. While the food maker topped Q3 earnings estimates ($0.55 vs. $0.48 est.), and raised full-year earnings guidance, revenues fell short of expectations for the fourth quarter in a row. Top line results were hurt by a negative current impact, relatively flat volumes, and lower dairy pricing.

As a result, the Dow component also cut its organic sales growth expectations for the year to 2 percent from prior guidance of up 3 percent.

3) Con-Way falls 3 percent after Q3 earnings missed estimates ($0.39 vs. $0.52 est.). Revenues were essentially in-line with estimates but plunged 17 percent from a year ago.

The trucking company's CEO Douglas Stotlar noted that poor pricing and weak demand presented "formidable challenges" and will continue "to persist in the near term, diminishing the prospects for earnings growth."

4) Oil driller Baker Hughesis down 5 percent pre-open as earnings fell short of expectations amid a 26 percent decline in revenues. International results were particularly weak as pricing remained under pressure.

Rig counts were down a steep 52 percent from last year, but CEO Chad Deaton noted that gas drilling was "gradually increasing," a trend that "will likely continue through 2010."



Questions?  Comments?