Trader Talk

Tug of War Continues: Europe Stinks vs. Stronger US Data

The tug of war continues: Europe stinks vs. stronger U.S. economic data.

Everyone is standing around, wondering when they will be able to get back in for more than a day.

No, I'm not talking about the Occupy Wall Street protestors, even though they were standing around the perimeter of Zuccotti Park when I went by early this morning, wondering when they would be allowed back in.

I'm talking about investors in European sovereign debt, who are again "leaving the park" — there were widespread rumors that Asian investors were dumping debt — selling at already-distressed levels and wondering what's a safe level to get back in. If at all.

Italian 10-year sovereign debt is once again over 7 percent, Spain is at 6.3 percent.

"The political problems may be drawing to a close, but the fiscal problems are still there," one trader said to me this morning. ?

U.S. economic news much better than expected, but it's making only a modest difference in equities. Futures barely moved even though producer prices are under control, October retail sales and November Empire manufacturing numbers were both stronger than expected.

Still, the economic news has been trending better. Maybe that's why Morgan Stanley just raised their fourth-quarter gross domestic productnumbers.??


1. Even the Wisemen think the European Central Bankshould go all in. German solidarity on the ECB is breaking down. Peter Bofinger is a member of the German Council of Economic Experts (and a Keynesian), which is supposed to to advise the German government on economic policy issues. This morning he openly advocated that the ECB should be the lender of last resort. "Politicians didn't make use of their time and now one has to be glad that the ECB is there," he said. Ouch.

2. The greed trade is still there, as well. Hedge fundsare underperforming, asset managers are underperforming. Everyone knows it, and there's a huge contingent that believes that this fact will — and is — providing an underlying bid to the market.

I have no way of quantifying this belief, but it is widespread on the Street.

3. Retail sales a mixed bad: Wal-Mart Stores missed on earnings per share, but U.S. same-store sales were up 1.3 percent, a little better than expected. Fourth-quarter guidance of $1.42 a share to $1.48 a share was right in the midpoint of the current estimate of $1.45 a share.

Saks at 11 cents a share, a couple pennies better than expected, and fourth-quarter same-store sales guidance of up 5 percent to 9 percent was about inline with estimates (no EPS guidance was issued).

Home Depot did 60 cents a share vs. 58 cents a share expected (revenues up 4.4 percent). The company also had a better than expected 4.2 percent rise in same-store sales, above the 2.9 percent expected; full-year guidance of $2.38 a share, back out the two cents beat and you have a one cent beat for the full year. Key story here is Home Depot continues to beat Lowe's on same-store sales: Lowe's is up 0.7 percent, while HD is up 4.2 percent.

Not so great: Staples guidance a little below expectations (39 censt a share to 43 cents a share; current estimates 43 cents a share), and TJX also a bit light on fourth-quarter guidance ($1.19 a share to $1.23 a share, estimate is $1.23 a share).

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