Libya Optimism, But Don't Bet on $80 Oil

Though oil is little changed this morning, there is more optimism that the Libyan revolt may be moving toward a resolution. All of this is based on vague reports of offers of negotiation on both sides — offers which may or may not have been fabricated by participants.

"Gaddafi will either leave the country under an agreement or be forced out by Rebels/NATO very soon," one trader, who grew up in the Middle East, wrote to me this morning.

But traders who have been betting on a return to $80 oil prices quickly may still be on the wrong side of the trade. Fadel Gheit, oil analyst at Oppenheimer, said on our air this morning that traders expecting a return to oil any time soon were kidding themselves — that the Gulf states were now in play.

Indeed, bears have been getting a bit more vocal lately. They note that almost all global strategists have high numbers for earnings — and none of them are taking those numbers down. Yet. "It's very hard to see how we go from $80-$84 in EPS for the S&P in 2010 to $95-$100 with input costs climbing, wages basically doing nothing, and housing declining," one trader wrote to me this morning.

The Saudi Arabian stock market was up another 2 percent overnight, it's fourth straight day of gains. Other Middle Eastern markets were also up. The Egyptian stock market, scheduled to open last Sunday, still has not reopened, six weeks after it was closed down. Spider-Man opens March 15. Maybe.


1) Investor day at Bank of America — I don't normally mention investor days, but this will be the first one for BAC in four years. I am hearing from traders that CEO Brian Moyhnihan has said that credit loss provisions will decline through the year. Hopefully, we will get more info on how much litigation risk there is from mortgage repurchase exposure. Moynihan will be on with our Maria Bartiromo this afternoon.

2) There has been a lot of talk about the tougher comps that retailers and restaurants would be up against this year. McDonald's is down 1 percent despite reporting a stronger-than-expected 3.9 percent rise in global same-store sales for February. A disappointing 2.7 percent rise in U.S. comps is weighing on shares. However, that weakness was outshined by strong overseas comps, which rose 4.0 percent in Asia and the 5.1 percent in Europe.

3) Brown-Forman beats Q3 estimates ($0.96 vs. $0.86 consensus) on stronger-than-expected sales (up 12 percent). Demand for its whiskey and tequila brands (think Jack Daniel's and el Jimador) has been improving in the U.S. and has maintained strength in emerging markets.

Outlook for the year was raised to $3.35-$3.45, above consensus of $3.31, but that was largely due to the strength in the first 9 months of the year. That new full-year guidance implies Q4 earnings of $0.58-$0.68 vs. $0.65 consensus.

4) Higher oil and gas prices haven't slowed down consumers from shopping at the malls and at retail stores…yet. The International Council of Shopping Centers reported a 2.3 percent rise in comps in the week end March 5. That was a week that saw oil rising over 6 percent to well over $100. Although the Street believes the jump in oil prices is temporary, the effect of $100 oil over a potential prolonged period is uncertain.

5) Dick's Sporting Goods rises 2 percent to a historic high after topping Q4 estimates ($0.76 vs. $0.72 consensus) on a better-than-expected 9.4 percent jump in comps. The sporting goods retailer's top line was also helped by store openings (26 new stores in 2010). That ambitious expansion continues this year, with 34 new stores planned, bringing the total to 478 stores.

Looking ahead, same-store sales in the current quarter are seen up 4 percent-5 percent, while earnings of $0.26-$0.28 are inline with estimates of $0.27.

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