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MV Weather Report: Wells Fargo to Beam Sunshine on Market


Rain or shine, we review the day's biggest stock stories.

Yesterday, we discussed the possibility of Caterpillar (CAT) having a positive effect on the market; today, it stole the show. The company reported better-than-expected earnings -- or so we think. The stock traded higher by 7.67%, thanks in part to the company raising full-year 2009 guidance.

Today on the Buzz and Banter, Professor Vitaliy Katsenelson gave his thoughts on the CAT quarter:

"It is interesting to observe the excitement the Street has with Caterpillar's earnings. They were better than company thought last quarter, but sales were still down 41%. I have to give CAT credit for cutting costs as much as they did. But here is what caught my attention in the quarter: the area that was doing less bad was Asia/Pacific, mainly China. Its sales were down only in the 20% range as opposed to other regions like the US and Europe where sales fell 40-50%.

"Here is what management said about China: "Fixed asset investment in May was 38 percent above a year earlier. Our dealers reported significantly higher deliveries of machines in June of this year than a year ago." So the company is doing less bad as it expected because China is doing well. But we know that all of Chinese growth was driven by government consumption and tremendous liquidity growth. China's largest consumers - the US and Europe - are struggling. It's exports are down 21% in June, while its economy posted almost 8% growth and money supply is up 28.5% in June."

We are now in the full swing of earnings season, and so far the reports have been better than expected. The S&P is confirming this: The index is once again perched at the high of the year -- 950-955. Today saw a new intra-day high of 956.53, but the index closed at 954.

Also on today's Buzz and Banter, Professor Branden Rife explained why it's difficult to find a level footing at these levels.

"We see outsized anticipatory moves higher in front of earnings releases that just so happen to coincide with obvious technical levels. My personal work is also showing me mixed signals!

"Late last week I adopted the 'when in doubt, sit it out' discipline. Strangely, it still applies through today. However, I think the picture will be quite a bit clearer after we get a little further clarity tomorrow morning on the dollar (failed today), oil (failed and reversed today), Apple (AAPL) tonight and Wells Fargo (WFC) in the morning."

Wells Fargo's earnings will be what most traders are watching tomorrow. The company is expected to report EPS of $0.34 on revenues of $20.5 billion. After the quarters from JPMorgan (JPM) and Bank of America (BAC), we already know that Wells should have no problem beating the EPS estimate. Analysts expect Wells to benefit from a strong mortgage environment, but could be negatively impacted by credit costs.

Before the bell: Boeing (BA), Domnios (DPZ), Eli Lilly (LLY), Morgan Stanley (MS), Pepsi (PEP), Pfizer (PFE), Suncor (SU) and Whirlpool (WHR).

After the bell: Chiptole Mexican Grill (CMG), Ebay (EBAY), F5 Networks (FFIV), Intuitive Surgical (ISRG), Mosaic (MOS), Qualcomm (QCOM), Sandisk (SNDK), and VMWare (VMW).

Busy week. Have a great night!
No positions in stocks mentioned.

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