Market Talk

US stocks essentially flat after the dollar’s overnight strength, which has zapped stocks lately, was blunted by Warren Buffett’s splashy acquisition of old-economy railroad Burlington Northern.

DJIA slips 18 to 9772, S&P 500 adds 3 to 1045, Nasdaq Comp gains 8 to 2057. Still, bulls are likely to take it as a positive, since in the misty hours this morning stocks looked like they were going to get nailed again. DJ futures were down nearly 100 points at about 6:38 a.m. ET (when I heard the market update on Bloomberg Radio on my way to the bus stop.)

But then Buffett comes along, mustering up all the heartland nostalgia he can, and says he’s buying the 77% of Burlington Northern he didn’t already own. Stocks strengthened, but never could get a rally going. They fell at the open, rallied, fell again, and finished mixed. What will be interesting to see now is how much staying power the enthusiasm over Buffett’s deal has.

The Oracle made a big deal out of this being a bet on the economy, and by some extension America. That’s a nice sentiment and it certainly plays well to the home crowd, but the reality is he made a business decision to buy a stable company that will pay off for him steadily over the years, but it has far less impact for the average American.

Elsewhere in America, J&J’s cutting up to 8,200 jobs. Not much heartland nostalgia in that move, and it shows that companies continue to retrench, which means less growth, which means less hiring, which means worse unemployment and underemployment and wage growth.

It’s nice that Buffett’s got a railroad to play with now. But it doesn’t mean much for Mr. and Mrs. America.

Not exactly a growth industry anymore.

An odd day for US stocks. Warren Buffett’s flag-draped acquisition of Burlington Northern is being portrayed as an “all-in” bet on the economy. That’s gotten plenty of attention from the business press, and, well, everybody really.

It’s amazing how when the economy’s on the downside, suddenly the folksy old guy from Omaha is current again. He couldn’t get the time of day during the dot-com boom, and who listened when he called securitized assets “weapons of mass financial destruction” in 2002? Nobody, that’s who. But when the world’s careening, there’s Buffett with a nice little editorial in the Times, saying, buy America, I am.

We have nothing but respect for Buffett, but this fawning is a bit much. He bought a railroad. Good for him. Go back and check out Burlington Northern’s third-quarter earnings and try to figure out how good it is for you.

Then why are stocks still down? Well, they haven’t been able to completely shake off the dollar-induced weakness from this morning, and there are still concerns surrounding the banks and, tech-related stocks, and J&J’s job cuts today show that employers are still cutting themselves down to size to fit into the new normal.

DJIA down 49, S&P 500 down more than 1, Nasdaq Comp down less than 1.

Not an 'exceptionally' chatty bunch, that Fed, but mind what they say all the same.

The two-day FOMC meeting begins today and based on all the discussion on exit strategies from Fed officials to financial journalists, investors should closely watch tomorrow’s statement and see if any hints are dropped on the Fed’s next move.

Almost a month ago Fed Chairman Ben Bernanke said the central bank will raise rates when the economy recovers, a pretty ambiguous statement as he didn’t say what would entail a recovery and didn’t offer a time frame. GDP rose 3.5% in 3Q, is that enough of a recovery to raise rates?

Not likely. As we detailed earlier, don’t expect the Fed to boost rates until after unemployment peaks. In the early 1990s, the Fed waited more than a year and a half after the jobless rate peaked before raising rates. And after unemployment peaked in 2003, the Fed waited a year to boost rates.

Currently, unemployment is still on the rise and doesn’t seem close to peaking. October’s nonfarm payrolls report is expected Friday and analysts are expecting to see another 175,000 jobs lost.

“I do not believe that the FOMC will significantly tweak the statement and leave an impression that a tightening of monetary policy is imminent,” Across The Curve blogger John Jansen says. “With the personal belief that the Treasury and Federal Reserve are working in tandem to revive the economy, I hold it unlikely that the FOMC would take any steps which would undermine a very fragile recovery.”

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There, feel better? Now go and buy a car.

It’s absolutely impossible to keep up with the flow of information these days. I can’t even keep up with everything Dow Jones publishes. So it took me a few days to get to Al Lewis’ column about Tim Geithner (here’s a version that ran in the Denver Post, if you’re not a Newswires subscriber.)

Al, who works out of Denver but was in town last week, sat in on Geithner’s session at the Sifma annual meeting last Tuesday. Al’s talent lies in taking these esoteric economic topics and turning them into living, breathing stories, usually by focusing on the people involved. His take on the Treasury Secretary followed in that vein:

Something about Timothy Geithner leaves me uneasy.

He’s smart, well-spoken, and has a confident cadence to his voice, but he looks like a 12-year-old boy.

But what really caught my attention, and got my ire, was this line from Geithner:

“When you start, as we did this year, with a crisis this intense, a recession this deep, with this incredibly damaging loss of confidence, the only choice you have, if you want to solve that problem, is to try to create incentives for people to spend.”

You want to create an incentive to spend? Get the deficit under control, keep the dollar from collapsing, restore a sense of fairness to the marketplace (i.e., multi-billion bailouts for favored clients, three-month “make work” jobs paving potholes for everybody else.)

People will spend money when they feel secure, when they don’t worry daily about their jobs, if they have one, when they think the government is prudently managing their country, not spending it into oblivion. You won’t need to coax people into spending money then.

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Warren Buffett’s Burlington Northern (BNI) buy, calling it an “all-in wager on the economic future of the United States,” sets up an interesting dynamic ahead of tomorrow’s FOMC statement.

Along with last week’s 3.5% 3Q GDP reading, Buffett’s rhetoric fuels the perception that the recovery is building steam, and the Fed doesn’t want to be left at the station clinging to its extremely accommodative policy when the economic growth train pulls away.

Growth is ultimately good for stocks, but a more hawkish Fed will help the US dollar, and stronger dollar has crushed stocks lately. Should be an interesting meeting today and tomorrow in Washington.

S&P futures well off earlier weakness, now down 4.20; DJ futures down 42.

Who says the dollar’s weak?

US dollar’s influence on other asset classes — namely stocks and oil — is evident again this morning, even in the face of news that Warren Buffett is buying the big railroad Burlington Northern. With the dollar index higher, stock futures are lower, maintaining the balance that’s been in play lately: the dollar on one side, and everything else on the other.

If you were among the many who’ve shorted the dollar in recent months, and used the proceeds to buy stocks or oil, why take the risk today that the FOMC might say something tomorrow afternoon to rally the buck? Certainly, after last week’s 3.5% 3Q GDP print, it could happen. And there seems to be a spreading belief that the committee will “tweak” their statement — it’s hard to see them getting more dovish.

Meanwhile, Buffett’s back on the front pages, jumping into the growth industry of 130 years ago with his $44 billion acquisition of Burlington. Listen, any time the market hears Buffett, acquisition and $44 billion, it’s going to get excited. But, two things. One, despite Buffett’s comments that this is “an all-in wager on the economic future of the United States,” it’s hard for us to see any big ramifications for the economy; it’s a railroad. All he’s going to do with Burlington is count the cash flow.

Two, don’t take your eye off the dollar. It’s the fulcrum point these days, and that hasn’t changed yet.

FOMC meeting gets underway today, statement tomorrow around 2:15 p.m. ET. Stocks down in Asia and Europe. September factory orders due at 10:00 a.m.; October auto sales figures also due out later.

US dollar index up 0.6%. S&P futures down 6.80; DJ futures down 63. Ten-year higher, yield at 3.41%.

(Paul Vigna contributed to this post.)