Trader Talk

Another Morning of Rumor and Innuendo

It's another morning of rumor and innuendo, with unconfirmed reports of one large Asian bank reduced its credit lines with all French banks, and another that European regulators are considering a ban on short selling.

In a way, this was inevitable: Attack the weakest players first (Ireland, Greece), then move to stronger players (Italy, Spain), then go right to the heart—attack France. Only Germany is likely to be spared.

One of the only pieces of good news here is that this will accelerate a fiscal union in Europe. Politicians need a crisis to put to their electorate the resolutions that are needed.

Of course, this is not 2008. Banks are far better capitalized, and have lower levels of leverage. The real estate bubble is no more.

Exposures of European banks are still too opaque, and that is part of the problem we are facing now.

And central banks are making efforts to coordinate their responses (still not good enough, but improving). The European Central Bank is buying sovereign debt of Italy and Spain, and will likely soon be forced to backstop all sovereign debt.


1. Another piece of good news: Insider buying appears to have picked up: Sixty-six insiders at 50 companies bought shares between Aug. 3 and Aug. 9, the most since the five days ended March 9, 2009, according to a report by Bloomberg. Buyers include Morgan Stanley CEO James Gorman and General Motors CEO Dan Akerson. A total of 919 insiders bought stock among all publicly listed U.S. companies between Aug. 1 and Aug. 10.

Even amid all the economic and stock market uncertainty of late, some positive guidance is giving a boost to a handful of stocks today:

2. After myriad poor earnings reports over the past few quarters, Cisco Systems jumps 12 percent after beating fourth-quarter estimates (40 cents a share vs. 38 cents a share consensus) and providing optimism over current quarter sales. The networking device maker expects sales growth of 1 percent to 4 percent vs. the Street’s current expectation of 2 percent growth. Also, progress in its previously announced restructuring plan should allow it to save by $1 billion in the current year.

3. Kohl’s rises 2 percent after beating estimates by a penny and raising guidance. Same-store sales edged up 1.9 percent last quarter, but are seen rising slightly higher in the current quarter (up 2 percent to 4 percent). As margins are expected to remain steady, earnings for third quarter are seen between 76 cents a share to 82 cents a share, mostly above 76 cents a share consensus, allowing the department store to raise its full-year outlook.

4. Brinker is up 5 percent after it topped fourth-quarter estimates by a cent, led by strong traffic at its Maggiano’s (up 5.8 percent) and Chili’s (up 2.1 percent) restaurants. Same-store sales across all its restaurants rose 2.6. percent. Full-year guidance of $1.80 a share to $1.95 a share is ahead of $1.76 consensus, with comps expected to rise 2 percent to 3 percent.