Trader Talk

Turks, Europeans Still Mad at US

Just back from ten days in Turkey, a country with one of the strongest growth rates in the world — over 9 percent, on a par with China.

I was accosted by several European money managers furious about the U.S.'s inability to deal with the debt ceiling extension.

They're furious because because they can't seem to handicap the outcome or the reaction. That's why we're in a holding pattern.

One thing the Europeans are jealous of: corporate America's balance sheet. The healthiest in the world, I heard several times, one of the few compliments anyone would pay to the U.S.

The real story — I kept insisting to the newly-rich Turks — is that some level of austerity has come to U.S. government spending. That is not a bad thing.


1) No big reductions in earnings expectations so far. The Turks and Europeans who accosted me in Turkey are baffled about why stocks have held up — they think the market is assuming no default (true), and that the maket is assuming a debt downgrade might be benign (I disagree with that).

Stocks have held up because earnings are generally good--we are still on pace for the $99 in earnings for the S&P 500 that the consensus is expecting in 2011.

True, there have been disappointments — Juniper , Caterpillar , 3M . Earnings in some other groups — like semiconductors — have been disappointing, but investors have been satisfied buying re-sets in some instances. But many traders thing the disappointing comments from semis is a temporary cyclical trough.

But there has been strength from Aetna , Apple , Amazon , and others.

Large-cap tech in particular has been strong — Apple crushed it again; Amazon had poor margins, but revenue growth was strong.

Bottom line: there are only a few large-cap growth names left — so people will buy.

Traders continue to talk up financials —  they are way undervalued, their balance sheets have gotten better and they are making money again.

5) Juniper shares fell in premarket, down 19% after sharply missing Wall Streets expectations on their Q2 earnings. The company cited weak sales to telecommunications providers. Juniper also forecasted weak third quarter results and expects cuts in enterprise and public sector spending in the near term. Juniper also suffering numerous cuts by William Blair, Citigroup, Think Equity, and Oppenheimer.

2) Dr. Pepper Snapple (DPS) reporting lower quarterly profit on higher expenses. Net income falling to $172M or $0.77 per share in Q2 from $183M or $0.74 per share a year earlier… Dr. Pepper Snapple (DPS) currently up 0.15%

3) ConocoPhillips (COP) beating estimates handily: $2.41 vs. $2.19.. Chairman and CEO Jim Mulvane saying "Higher adjusted earnings and cash flow were driven by better commodity prices and refining margins…up 1 percent in premarket

4) Southern Company (SO) beating market estimates as higher residential electricity sales made up for a dip in commercial sales. Q2 profit rose 18 percent to $603.3 million or $0.71 cents per share compared to $510.2 million or $0.62 cents per share in the prior year. Revenues were up 7.5 percent.

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