A Splash Of Reality

A little bit of economic cold water: Retail sales for March was a disappointment, Producer Price Index saw a big downtick, all of which cost us about 10 points on futures at 8:30 AM ET.

How "thick" is the floor under the stock market? Bulls are arguing it's thicker than bears want to admit. One trader noted this morning to me that a month ago everyone was praying for an UP day; now everyone is praying for a DOWN day.

They're praying for a down day so shorts can cover, and so others can put money to work.


1) Enough has been said about Goldman Sachs' earnings already; I would make only three points:

a) While fixed income was the highlight as expected, Wachovia noted that much of the big gains there "could have resulted from gains generated from AIG assets in the quarter and therefore are unlikely to be sustainable in the future." JP Morgan also said the fixed income results were "unsustainable."

b) Outside of FICC (fixed income, currency and commodities), results were generally weak in trading and principal investments, investment banking, and asset management.

c) As for more detail on losses on investments, we got this laconic line: "Illiquid assets generally continued to decline in value."

The most important event was the $5 billion capital raise; it is costing them little in terms of stock price this morning, and that will embolden others.

2) Johnson and Johnson beat by a wide margin, but only affirmed guidance for the full year. There's your cautionary outlook we are hearing a lot.

Bottom line: the pharmaceutical business was strong with sales of $5.8 billion, which was was hit by a 5 percent hit from currency, but the consumer business was a bit weaker than most expected, with sales of $3.7 billion, and medical devices with sales of $5.5 billion was a tad weaker than most expected.

3) Keep your money! MetLife is trading up 5 percent ahead of the open after announcing it would not accept any TARP money. The life insurer says it is "well positioned, with approximately $5 billion in excess capital."

4) Casino operator MGM Mirageis up 8 percent in pre-market trading after it said it plans to pay $70 million in construction costs by April 17 for its delay-plagued Las Vegas CityCenter joint venture.

5) Electronics manufacturer Royal Philips Electronics is up 4 percent pre-open despite posting a surprising Q1 loss amid a "significant further deterioration of our markets."

No near-term turnaround is in sight either, as Philips expects "demand in the second quarter to be broadly in line" with the weak demand it experienced in the first quarter.




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