Futures bounced off the lows on a simply awful durable goods number (down 6.2 percent, estimates were for declines of 2.5 percent).
Mortgage rates are indeed dropping in response to the new Treasury plan to buy mortgage backed securities; many report indicate 30 year fixed rate mortgages dropped about 40 basis points in the last 24 hours, below 6 percent.
On Monday, BHP Billiton called off the Rio Tinto deal. Today, it looks like another big deal--the $42 billion takeover of BCE (the Bell Canada parent) by a consortium led by Providence Equity Partners and Ontario Teachers' Pension Plan, may not happen because KPMG apparently will not deliver a solvency opinion, which is required to close the merger. In other words, the whole deal has too much leveraged debt.
Finally, the bottoms-up analysts are starting to cut fourth quarter 2008 and 2009 numbers. Today Oppenheimer cut estimates on industrials, and JP Morgan cut estimates on railroad and trucking stocks.
- Durable Goods Orders Shrink Dramatically
Duh. The glacial speed the analysts have been moving has been nothing short of scandalous. Top-down strategists (guys who do estimates of earnings based on macroeconomic factors) have 2009 estimates for the S&P 500 as low as $60, but the bottoms-up analysts (the guys who just cover individual companies or industries), still collectively have earnings estimates for the S&P around $80. $80 vs. $60: somebody is terribly wrong. Guess who. Fortunately, the stock market is not waiting for their opinions.
How tough is it to figure out 2009 earnings? Just about impossible. Look at Deere . CEO Robert Lane said, "the outlook for the year ahead is highly uncertain and its impact on John Deere's operations is difficult to assess." Deere down 10 percent pre-open; earnings were below expectations. 2009 net income guidance of $1.9 billion is below analyst estimates of $2.3 billion. Agricultural equipment sales are expected to grow 5 percent next year, that is below most expectations.
Tiffany down 7 percent, reported earnings above expectations, but North American comp store sales were down 16 percent (even the New York flagship saw sales down 5 percent year-over-year). November sales "softened" even further. 2008 full year guidance of $2.30-$2.50 is below expectations of $2.58, but it was widely anticipated they would lower earnings. No guidance for 2009.
- Lower US Mortgage Rates Lift Application Demand
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