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GE Vs. Caterpillar - Who's the Better Barometer?

On Friday, the Fast Money traders were trying to make sense of almost contradictory earnings results and how the market reacted.

Investors sold the Dow after the latest report from Caterpillarshowed results missed estimates. Investors were particularly spooked by the cautious tone used by CEO Douglas R. Oberhelman and his comments about “softening of growth” in China.

As a heavy equipment maker, Caterpillar has an out-sized influence on markets because it is seen as a barometer of economic activity.

However another company had very different things to say about the prospects of global growth – and it too is a major industrial bellwether. We're talking about GE.

In an earnings report also released Friday, General Electric showed a 20% jump in profit and said it’s seeing "especially strong" growth internationally, citing strength in China and Southeast Asia.

Also CEO Jeff Immelt said, “Overall, industrial earnings should improve in the second half of 2011 and the cycle is expected to accelerate in 2012.” Nonetheless the stock sold off.

What should you make of the different outlooks from these two industrial titans and the resulting market action?

In other words, who’s the better barometer, Caterpillar or GE?

OptionMonster Pete Najarian is almost certain that GE is the better barometer.

He thinks investors didn’t really understand the CAT earnings and as a result believes the stock was oversold. “The company is still hitting on all cylinders,” he says. “I think the sell-off in CAT stock presents opportunity.”

Trader Steve Grasso thinks the technicals will tell the tale. He says $103.70 is the 50-day in CAT. “Wait for 3 or 4 days and see if it holds.” If it does he thinks investors over reacted and that the stock was oversold. (In other words GE will prove to be the better barometer.)

If you're looking for a 'tell' Trader Zach Karabell says look at GE. “I'd take stock on what GE says about (global growth) and what most other companies have said about growth."

However, unlike Najarian, he doesn’t think the pullback in Caterpillar is a buying opportunity.

In fact, he thinks there’s more than meets the eye in the Caterpillar release. “I don’t like when a CEO blames uncertainty for soft business – that’s what CEOs say when they don’t want to deal with an internal issue – that makes me cautious.”

Trader Stephen Weiss isn’t worried. He parsed through all the numbers and says “when you go through the release, Caterpillar hasn’t changed their China growth forecast – at all. They were looking for 9% growth in the first quarter and it’s still their prediction now.”

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MONEY IN MOTION

The euro slipped against the dollar Friday on concerns about Greece, and whether the bailout is going to be enough to keep the sovereign debt crisis from spreading.

How should you position now?

Find out from Willie Williams of Societe Generale. Watch the video now!



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