Trader Talk

Traders Say Greek Bailout Is Useless


U.S. futures, which were weak overnight on weakness in Europe and China, dropped a few more points near 8am ET on word that an improvised explosive device (IED) was found in a vehicle outside Aldgate East in London, which was soon shown to be a false alarm, according to reports.

Debtor Nations

Greece and Spain are down about 4 percent, the rest of Europe down 1 to 2 percent. Why don't equity traders believe the Greek bailout will be helpful?

Most I have spoken with believe that the chances are high that much of the austerity measures will not be implemented, and that what is implemented will only stump growth for years to come — in other words, it's a no-win situation.

In China, the Shanghai Index closed down about 1 percent as Chinese manufacturing weakened, but the Chinese government has been looking to cool off the economy.

European banks like Credit Suisse , ING and Deutsche Bank are down 3 to 7 percent.


1) Just to remind everyone that retail sales are improving: Ann Taylor up 7 percent pre-open on comments that earnings for the first quarter will "significantly exceed expectations."


a) comp store sales will be up approximately 11 percent as the company spoke of "meaningful traffic improvement;"

b) total sales will be about $475 million, well above prior guidance of $445 million;

c) gross margin of 59 percent is well above previous guidance of 56.5 percent.

April retail same store sales for most companies will be out Thursday.

Redbook said April retail sales were up 2.4 percent from a year ago, but down 2.2 percent from March (remember Easter was mostly in March this year).

2) The world's two largest drug makers reported results for their first full quarter following their recently completed mega-mergers with rival drug companies late last year:

a) Merck , which acquired Schering Plough, is up fractionally after its Q1 earnings topped expectations ($0.83 vs. $0.75 consensus). Revenues grew more than expected, boosted by a strong 10 percent rise in sales of its asthma drug Singulair and a modest 5 percent rise in sales of its cardiovascular drug Zetia.

Guidance for the full year remains cautious though, with earnings forecasted between $3.27 and $3.41 (vs. $3.41 consensus).

b) Fellow Dow component Pfizer , which bought Wyeth, is up 2 percent after reporting better-than-expected earnings ($0.60 vs. $0.54 consensus), which were helped by significant cost cuts. Revenues also exceeded the Street's forecast as sales of its big cholesterol drug Lipitor (16 percent of total sales) and its popular arthritis drug Celebrex both rose more than expected.

2010 guidance was reaffirmed, inline with current estimates ($2.10-$2.20 vs. $2.17 consensus).

3) MasterCard rises 2 percent after Q1 earnings easily exceeded analyst forecasts ($3.46 vs. $3.14 consensus). Revenues grew 13 percent (vs. expectations of 10 percent growth) as volumes in usage of the company's credit cards jumped. The number of transactions rose 5 percent, while dollar volumes increased 8 percent.

4) Despite disappointing sales, DineEquity earnings beat estimates ($1.08 vs. $0.78 consensus). Same-store sales at its restaurants continued to fall, albeit at lower rates than prior quarters. Comps at its Applebee's restaurants fell 2.7 percent, while comps at its IHOP chain fell 0.4 percent - both better than expected by the Street.

Sales guidance for the year is mixed, with Applebee's comps seen between flat to down 3 percent and IHOP same-store sales of plus or minus 1 percent.

5) Builders continue to report mixed results. Beazer Homes the latest builder to report, with a loss not as great as expected. The theme for builders: margins have been improving as prices have been more stable and the backlog of homes on previously impaired land is slowly being sold off. The bad news: many, like BZH and Ryland are still reporting revenues below expectations.

6) Private equity lives: financial data provider Interactive Data Corporation being taken private by Silver Lake and Warburg Pincus for $3.4 billion in cash. It's the biggest LBO of the year. IDC had already announced in January that the company was essentially for sale.

7) Vulcan Materials , which is big in the crushed stone business, noted that aggregates shipments in March increased 4 percent year over year — doesn't sound like much, but it's the first year over year monthly increases in four years! Unfortunately, the company did not change its guidance for the year, and even reduced its pricing forecast.

8) General Mills announced a 2-for-1 stock split effective June 8, its first split since 1999. The stock has risen over 50 percent since its 3.5-year low back in March 2009

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