Trader Talk

Spain's Blowout Auction


Blowout Spanish auction, is the European Central Bank (ECB) program working? You have to think it's having an effect. Spain sold 3.7 billion euros of three-month paper at 1.735 percent...way below the 5.11 percent yield it paid in November. It also sold 1.92 billion euros of six-month paper at an average yield of 2.435 percent, also way below the 5.227 percent in a previous auction.

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Tomorrow the ECBwill begin offering bank loans of up to three years at a rate of 1 percent. How much will banks borrow? There's estimates that it will be in the 500 billion euro ($655 billion) range.

What will they do with the money? Most traders do not believe there will be a huge rush to buy sovereign debt. Instead, they will use the money to cover maturing bank debt. Some 800 billion euros ($1.04 trillion) in term wholesale maturities come due in 2012, according to RBS.

This new three-year loan program appears to be considerably relieving market anxiety.

Another factor: The new Spanish government announced tough new austerity measures.


1. The German December IFO business confidence survey rose.

2. Navistar soars 11.5 percent in pre-market trading after reporting fourth quarter earnings per share of $3.37, beating The Street’s $3.08 expectation. Navistar achieved its best full-year profit since 2008 due to an uptick in demand in the U.S. truck market. Lower costs and a sustained performance in its military business boosted the company's performance. Navistar's fourth-quarter revenue rose 28 percent to $4.32 billion, versus $4.44 billion estimates.

3. JefferiesGroup climbed 5.5 percent in pre-market trading after posting earnings per share of 17 cents, excluding items, versus analysts’ 14 cents a share estimate. Jefferies reported $554 million in fourth-quarter revenue, versus estimates of $562 million. The investment bank reported that Monday its board of directors declared a quarterly dividend of $0.075 per share.

4. CVS Caremark rose 3.8 percent in premarket trading after increasing its quarterly dividend 30 percent to $0.1625 per share. CVS provided 2012 guidance expecting adjusted earnings per share to be in the range of $3.15 a share to $3.25 a share, an increase of 13 percent to 16.5 percent. The company expects the retail portion’s operating profit to increase by 7 percent to 9 percent, and the pharmacy segment’s operating profit to increase by 11 percent to 15 percent.

5. Packaged-food companies were a mixed bag:

ConAgra Foodsbeat The Street, posting a second-quarter adjusted earnings per share of 47 cents a share versus 43 cents a share estimates. ConAgra cited strength in its consumer food segment, which accounts for 63 percent of year-to-date sales and reported second-quarter sales of $2.2 billion — up 4 percent year-over-year. ConAgra's second-quarter revenue was $3.4 billion, versus analysts’ $3.3 billion estimate.

General Mills fell 3.6 percent in pre-market trading after missing analysts’ estimates, as higher input costs hurt gross margins. General Mills posted second-quarter earnings per share of 76 cents a share, excluding items, versus The Street’s 79 cents a share expectation. The company's sales rose 14 percent to $4.62 billion, fueled by the Yoplait acquisition, increases in price and volume, and foreign-exchange rates.

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