Little Chance of Talking Up This MarketBy MARK GONGLOFF The government and markets have a communication problem. President Obama and Federal Reserve Chairman Ben Bernanke will have chances to address the disconnect on Tuesday. Mr. Bernanke is slated to deliver his semiannual monetary-policy testimony on Capitol Hill. Mr. Obama will speak to a joint session of Congress, disclosing much of his budget strategy. Financial markets have clung to every word from policy makers' mouths throughout the raging financial crisis, with poor results. Stocks rebound on hopes the government will save everything, then fall on the realization it can't. Even the upside jolts have been increasingly anemic. A rally Monday that was sparked by talk of a bigger government stake in Citigroup barely survived the opening bell, and then was overwhelmed by yet another unnerving selloff. One explanation is that reality is setting in: Bank nationalization -- or controlled bankruptcy, really -- is a necessary and probably inevitable step in the banking industry's healing process. But that alone won't stop the credit losses, as evidenced by American International Group Inc.'s unquenchable thirst for government cash. Another possibility is that markets are losing faith in their rescuers. Monday's assertion by the Treasury Department, Fed and other regulators that banks are adequately capitalized smacks of wishful thinking. If regulatory "stress tests" starting this week look like rubber stamps that don't shine light on balance sheets, credibility will suffer even more. Government communiqués obviously can't be too downbeat, but they should avoid feeding the view that problems are still being postponed for a later day. While some critics say Mr. Obama is too gloomy, he needs to leaven uplift with reality. "The markets would prefer honesty and reality rather than false hopes," says Brian Reynolds, chief market strategist at WJB Capital Group. DreamWorks' Profit May Win the Award Maybe Jack Black should be betting on DreamWorks Animation SKG. On Sunday night, the comedian quipped at the Oscars that he made money in animated movies by taking the proceeds of his voiceovers for DreamWorks and betting on Walt Disney-owned competitor Pixar. But there's a good chance DreamWorks "crushes" fourth-quarter per-share estimates after the bell Tuesday, says Michael Pachter, analyst at Wedbush Morgan Securities. The reason for his near-certainty: DreamWorks' history of subtly guiding analyst expectations lower during the quarter, he says, only to widely exceed revised expectations. Fourth-quarter numbers, once at 79 cents a share, now are just 60 cents. Mr. Pachter's bet: DreamWorks will actually report profits of 72 cents a share, he says. Stifel Nicolaus analyst Drew Crum isn't so confident. Sales of DVDs of Mr. Black's "Kung Fu Panda" movie are below internal expectations, he says, and revenue for the successful "Madagascar 2" sequel will likely be pushed into the first quarter for accounting reasons. Mr. Crum says profits could come in at 52 cents a share. Though he concedes that might be too low, "I think consensus is at risk this time." —Jeff D. Opdyke Email to: tape@wsj.com |