Trader Talk

Pisani: Apple & Geithner 'Witch Hunt'

Lots of market moving events today, from the Apple show to President Obama's State of the Union speech to the conclusion of the FOMC meeting to the Geithner hearings.

Congress Questions Geithner on AIG Bailout, Pt. 1

Traders are hopeful the President will focus on the economy and job creation, and tone down the populism and the attacks on bankers.

Traders are less optimistic that anything good will come from the Geithner hearings — or The Geithner Witch Hunt as some are calling them — in the House Committee on Oversight and Government Reform.

Legislators seem desperate to find some kind of smoking gun tying Geithner and Paulson to inappropriate involvement/assurances/backroom dealing in the AIG bailout.

Two things will not change: 1) there will be lots of rooting through emails, and 2) Sen. Jim Bunning will continue to mispronounce Bernanke's name (Bernake? Should Bernanke start calling him Senator Bunting in retaliation?).

As for the FOMC, everyone believes the environment is way too politically charged for any bold statements. There is unanimous agreement that the Fed will keep in the language keeping rates low "for an extended period."

Most believe they will reiterate they will end the $1.25 trillion purchase of mortgage-backed securities by the end of March, though a small minority think there may be language implying it might be extended.

Watch the Geithner/AIG Hearings:

- Part 2

- Part 3

- Part 4

(See Parts 5 and 6, next page.)

Boeing, Caterpillar, Berkshire...and More Geithner


1) Caterpillar down 4 percent pre-open, Q4 earnings above expectations but revenues below expectations.

Guidance of $2.50 for 2010 is a bit below analyst consensus of $2.71; CEO Jim Owens estimates sales will be up 10 to 25 percent, current consensus is for a gain of roughly 10 percent.

Owens noted they continued to see signs of economic improvement, particularly in China and developing countries; but that North America, Europe and Japan "have not rebounded as quickly as developing countries."

Caterpillar is a good example of the problems manufacturers had last year: end-user demand collapsed, and dealers were left with large inventories which had to be taken down. As a result, sales to those dealers were well below even the reduced end-user demand.

That problem is now being corrected: "We expect relatively little change in dealer inventories in 2010."

The good news is that CAT's sales should now be in line with end-user demand. The hope is that with inventory levels now very lean, a small pickup in demand will lead to significant new orders.

We haven't seen that in a significant way yet, and judging by Owens' estimate of an increase of 10 to 25 percent in sales, he too is not sure when — or if — those sales increases will materialize.

2) Although its Q4 results topped estimates, Boeing is down 1 percent after its 2010 guidance disappointed the Street ($3.70-$4.00 vs. $4.26 consensus).

The manufacturer of commercial aircraft and defense equipment continues to be cautious about 777 aircraft production and a reduction in military projects. Still, the company expects to deliver 460-465 airplanes next year, including the first 787 Dreamliner deliveries.

3) United Technologies beat estimates ($1.24 vs. $1.14 consensus) as the maker of defense equipment, security products and air conditioners relied on further cost controls to offset continued weakness in demand.

Revenue fell a less-than-expected 5 percent, but the Dow component noted it saw order rates increase "in some Asian economies, notably China."

Guidance for 2010 was affirmed ($4.40-$4.65), in line with current Street estimates ($4.60 consensus).

4) Stanley Works also saw better than expected Q4 earnings boosted by reductions in expenses and commodity costs. Sales of its construction products and tools were particularly week, falling 23 percent in the quarter amid significant volume declines in the U.S. (down 30 percent) and Europe (down 26 percent).

Despite the poor sales last quarter, 2010 revenues are seen up 2 percent to 4 percent (vs. up 1.7 percent consensus), while earnings look to be solid ($3.00-$3.25 vs. $3.04 consensus).

4) Dick's Sporting Goods gets a 4-percent boost after the retailer significantly raised 2009 outlook on improved sales. It now sees same-store sales RISING 2 percent vs. prior forecast of 4 percent to 6 percent DECLINES.

Earnings guidance was also raised to $0.54, above the consensus forecast of $0.49.

5) Warren Buffett's Berkshire Hathaway Class B shares jump 8 percent pre-open after S&P announced the company will be added to the S&P 500. It will replace railroad Burlington Northern, which is being acquired by Berkshire. At $160 billion, it will be the 21st largest stock by market capitalization in the S&P 500, according to S&P.

(Where Berkshire Class A is Now: )

6) The Bombay Stock Exchange Sensitive Index lost 2.2 percent ahead of its central bank meeting this week; some are predicting they may raise rates, but most feel they will institute higher reserve requirements for banks, just as China did. The index is down about 8.5 percent from its recent highs.

Watch the Geithner/AIG Hearings:

- Part 5

- Part 6

CNBC Data Pages:



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