The CPI number, which posted a decline of 1.7 percent on the headline numberand core at 0 percent, both below expectations, was not great but bear in mind much of this is due to the decline in commodities. This decline has likely run its course, so we may see much more moderation in the decline in CPI and PPI. Also bear in mind the dollar has been weaker recently, which will put more upward pressure on commodities.
1) You could hear a sigh of relief on the Street as Goldman reported a loss of $2.12 billion, or a loss of $4.97 per share.
This is pretty terrible, but it was about in line with expectations: many analysts had already expected a loss of close to $5.00 (consensus was a loss of $3.73), so anything in the ballpark was good news.
As expected, Goldman reported significantly losses in Principal Investments (including $961 million from losses in commercial real estate), and a $631 million loss due to the decline in value of their investment in International and Commercial Bank of China. There was also a loss of $3.41 billion in Fixed Income due to losses on leveraged loans and residential mortgages.
Goldman trading up about 3 percent pre-open.
2) The Fed will cut rates today, the question is whether it will make a difference. ECB Pres Trichet late yesterday said "Do we have a feeling there is a limit to the decrease in rates? At this stage certainly yes."
3) Gee, who will sign the paychecks? Best Buy trading up 9 percent after offering a separation package to nearly all corporate employees, and reporting earnings a bit ahead of expectations ($0.35 vs. $0.24 consensus). They are reducing capital expenditures by 50 percent next year.
4) Fertilizer stocks trading up as Merrill Lynch upgraded Potash ,Mosaic , and Agrium though Credit Suisse lowered estimates for Potash, noting weaker demand and prices.
5) Automotive parts supplier Johnson Controls has withdrawn its 2009 guidance; no surprise given the uncertainty in the automotive sector. More surprising is their estimate of 2009 auto sales: 9.3 million units, probably one of the lowest estimates on the Street.
6) Yesterday's volume and price action was about the quietest since Labor Day. In fact, the volatility has been notably lower for the past week and a half. The S&P 500 is down about 40 points since hitting its recent closing high on December 8th, but the decline has not been intense; there has not been particularly strong buying or selling pressure in the past week and a half.
This has been part of a trend: December has seen a smaller range of price swings than November, and November smaller than October.
There is no guarantee this will continue. In particular, there has been concerns that we will see a new round of redemption requests after January 1 in light of the Madoff scandal. But for the moment, market participants (other than those who trade volatility) are happy with the more stable markets.
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