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Two Ways: Caterpillar Takes Wrecking Ball to Stimulus


Strengthen your portfolio in good times and bad.

Caterpillar (CAT), the industrial conglomerate, said the US missed an opportunity with its recent $787 billion economic stimulus plan.

According to Bloomberg, the company called the infrastructure portion of the package "disappointing" and not as aggressive as those seen in nations like China, and said the US "missed an opportunity to correct past underinvestment in US infrastructure."

Furthermore, Caterpillar CEO Jim Owens, who happens to be part of President Barack Obama's Economic Recovery Advisory Board, said that this will likely be the worst year for global GDP growth in 50 years.

The company issued the economic commentary in conjunction with its first-quarter earnings release. Excluding certain costs, the company reported a net loss of $112 million, or 19 cents a share. Revenues dropped 22% to $9.23 billion.

Shares of CAT ended up 3%, to $31.39.

For more on CAT, see Professor Jeff Macke's Stress Tests Not Actually All that Stressful.

From the Bull Pen: For the broader markets in general, the bull case is that the 20 day moving average held for the S&P 500. This should be a positive for Caterpillar. One can set a sell stop below the day's low.

From the Bear Cave: The bear case is that this was just another Turnaround Tuesday anomaly and that today's 2% move in the SPX was a 50% retracement that began with the selloff at 875. Bears playing the downside can use Professor Macke's Friend, the Ultrashort S&P 500 (SDS). Remember to set a tight sell stop.

Have a great night!
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