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Trader Talk with Bob Pisani

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  Tuesday, 16 Dec 2014 | 10:16 AM ET

Traders focus on Russia and collateral oil damage

Posted By: Bob Pisani

Overnight the Russian Central Bank hiked its benchmark rate to 17 percent, a move designed to stem the big drop in the ruble. So much for that strategy. The ruble has continued to drop, now at 72 to the dollar; it was roughly 50 rubles to the dollar at the start of the month.

It stabilized as a Russian banking official said the central bank will take more measures. Are capital controls coming?

Still, the Russian stock market was down another 12 percent—and down 35 percent this month—though bear in mind this is quoted in dollar terms.

Read MoreWhy Russia's monster rate hike spells trouble ahead

More worrisome is the rise in the yen. The yen carry trade is the classic safe haven play. So much money is invested in borrowing cheap yen and re-investing it all over the world that any reversal in the trend is a sign traders are covering bets.

That is what's happening, with the yen down to 116 to the dollar, from a little over 120 a week ago. Now, that is not a huge drop—on a percentage basis we saw a bigger move in early October—but it's enough to get everyone's attention.

Other emerging markets are also weak. The stock markets in Abu Dhabi, Saudi Arabia, and Dubai are all down roughly 6 to 7 percent. The Philippines, Indonesia, and Vietnam have fallen roughly two percent.

»Read more
  Monday, 15 Dec 2014 | 10:29 AM ET

Market wants to know how Russia will fund imports

Posted By: Bob Pisani

Russia's stock market is down 8 percent at the U.S. open, adding to the roughly 25 percent declines we have seen this month.

The problem is a simple one. With oil down 40 percent, investors are asking how the Russians are going to pay for the all the stuff they import. They are huge importers of everything from cars to computers to meat, but oil is far and away their biggest source of revenue.

Russia Export Revenues (source: EIA)

  • Crude oil: 33%
  • Petroleum products: 21%
  • Natural gas: 14%

Read MoreAre Russia's bonds the next big worry?

So crude oil and petroleum products are roughly 50 percent of the country's export revenue. See the problem?

»Read more
  Thursday, 11 Dec 2014 | 10:04 AM ET

IPOs face tough year-end environment

Posted By: Bob Pisani

As we approach the end of the year, the push is on to get IPOs through the door. The problem: market conditions are not cooperating.

Overnight, Polar Star Realty, a REIT that manages office and industrial properties in Scandinavia, got postponed due to "market conditions."

The Renaissance Capital ETF, a basket of roughly 60 recent IPOs, is down more than 4 percent this month.

It's going to be a big night for IPOs. Seven deals are trying to price tonight, including four software companies.

Read More What will be hot for 2015 IPOs?

The most interesting one is software analytics company New Relic, which helps companies improve website experiences. The government hired New Relic to fix problems consumers were having on healthcare.gov .

The company is trying to sell 5 million shares, but the terms were increased from $18 to $20 to $20 to $22. That's a good sign.

Workiva is a cloud platform to help companies with their SEC filings. It sounds pretty specialized, but the company has $100 million in revenue. Workiva is seeking to raise 7.2 million shares at $13 to $15.

On the Nasdaq, Connecture manages medicare.gov and many of the top health plans. It aims to raise 5.8 million shares at $12 to $14.

Database software firm HortonWorks, which runs the Hadoop system, is seeking to raise 6 million shares at $12 to $14. Though well known in the enterprise data space, its has never made money.

Read MoreA holiday treat for tech investors—IPOs

Separately, aircraft leasing company Avolon Holdings, reinsurer James River Group, and powertrain component manufacturer Metaldyne Performance Group are also seeking to price tonight.

There is a little bit of relief because two big names did price overnight. LendingClub, the largest peer-to-peer lending service, priced 58 million shares at $15, above the price talk of $12 to $14.

Chinese mobile-based social networking platform Momo priced 16 million shares at $13.50, the midpoint of the price talk of $12.50 to $14.50. Alibaba owns a 20-percent stake.

»Read more
  Wednesday, 10 Dec 2014 | 10:31 AM ET

P2P lending stocks offer rewards ... and risk

Posted By: Bob Pisani

We are heading into the end of the year, and this week we will see a spate of IPOs get pushed through the door.

On Wednesday night, LendingClub, the largest peer-to-peer lending service, is seeking to price 57.7 million shares at $12 to $14 a share, which is up from $10 to $12 just two days ago. Peer-to-peer lending has grown dramatically in the past few years as consumers and small-business owners are using it to bypass traditional lenders like banks.

Since LendingClub launched in 2007, it has facilitated more than $5 billion in loans, including more than $1 billion in the second quarter of 2014. That's growth. And it's turning profitable. LendingClub's competitors, of course, are banks, but in many cases they are hamstrung by regulations.

Read MoreLendingClub raises IPO price as offering nears

The flip side is equally interesting; investors use LendingClub to earn returns. I've seen considerable interest in investing in peer-to-peer lending platforms as an alternative to, say, high-yield investments.

The downside is that should the consumers whose loans you are investing in default, you have very little recourse. For personal loans, you do not have a claim on any assets, so you can get burned if the economy suddenly turns down.

»Read more
  Tuesday, 9 Dec 2014 | 10:17 AM ET

Tough morning for global equities

Posted By: Bob Pisani
A trader works on the floor of the New York Stock Exchange.
Getty Images
A trader works on the floor of the New York Stock Exchange.

There's only 16 trading days left in the year. Tuesday's action is a good reminder that with major indices essentially at historic highs, there is not much time to make a lot of money, but there is plenty of time to lose it.

It's a tough morning for global equities:

1) China's Shanghai Index closed down over five percent, the biggest one-day drop in about five years, as the government's clearing house has tightened the use of corporate bonds as collateral for short-term stock financing. The People's Bank of China will no longer accept bonds with a rating below AAA as collateral.

2) The yen strengthened, dropping below 120 to the dollar. This is the classic safe haven trade. This always is an issue since the yen carry trade, where investors buy yen cheap and invest the money overseas, is a major factor in global stock liquidity.

3) The continuing drop in oil is putting pressure on stock markets in the Middle East, with Dubai down about 6 percent, Qatar and Abu Dhabi down about 3 percent.

Watch the country ETFs of big commodity producers like Canada (EWC) and Russia (RSX) today.

Also keep an eye on tangential commodity plays like Royal Bank of Canada, which has been heavily involved in financing western Canadian oil exploration.

Even the euphoria around low oil and the boost to airlines may be fading. Raymond James downgraded Spirit Airlines, saying lower oil will be only a limited help to profits.

4) Europe is weak on heavy volume, with Greece down more than 10 percent.

Euro zone finance ministers extended Greece's bailout program two months. The Greek prime minister has called for a no-confidence vote on Dec. 17 in order to get the opposition anti-EU party Syriza out of the way and then move ahead with reforms. However if he loses the vote, general elections will come quickly; that is the source of the anxiety. Syriza is leading in the polls.

While the move down in oil is no shock, today's surprise announcement from China PBOC and the Greek no confidence vote is a reminder that tail risks are still very present.


»Read more
  Friday, 5 Dec 2014 | 10:12 AM ET

Big beat on jobs report, here's how stocks react

Posted By: Bob Pisani
A service technician grinds temporary spot welds while working on an exhaust manifold for a John Deere tractor at Klein Equipment, a John Deere dealership, in Galesburg, Illinois.
Daniel Acker | Bloomberg | Getty Images
A service technician grinds temporary spot welds while working on an exhaust manifold for a John Deere tractor at Klein Equipment, a John Deere dealership, in Galesburg, Illinois.

Wow! Nonfarm payrolls were up 321,000 in November, the biggest gain since January 2012. There were also large revisions upward in prior months.

S&P futures jumped 2, then dropped down 5 as the "economy is getting better" crowd fought the "Fed will tighten sooner" crowd.

This is a big beat. Nonfarm payrolls beating consensus by more than 80,000 jobs on the plus side are fairly rare. It's only happened ten times since 2004, according to our partners at Kensho.

Read MoreStrong jobs report give Fed green light: Analysts

The S&P 500 was positive seven of those 10 trading days (70 percent), with an average return of 0.47 percent.

The best performing sector in the S&P on these days—far and away—has been Financials, with an average percent return on those 10 days of 1.4 percent. However, that sector only traded up 60 percent of the time, but had several years where Financials rocketed up on that day.

For example, on May 7, 2009, Financials were up 7.4 percent, another day when Nonfarm Payrolls exceeded expectations by more than 80,000 jobs. That was also the day Fed Chairman Ben Bernanke gave a speech at the Federal Reserve in Chicago on lessons from the financial crisis, which may have also influenced Financials.

The most consistent outperformer on those 10 days were Industrials, which were up 90 percent of the time, for an average gain of 1.0 percent.

That sounds like the most consistent bet.

»Read more
  Thursday, 4 Dec 2014 | 4:14 PM ET

Here's what happens when the jobs report surprises

Posted By: Bob Pisani

Tomorrow at 8:30 a.m., we get nonfarm payroll reports for November. Consensus is for a gain of 228,000 jobs.

Thanks to our new partners at Kensho, we can take a look at what will happen if the jobs report is better, or worse, than expectations.

Let's say that the jobs report comes in better, by 20,000 jobs or more. What happens to the S&P 500 on that day, and what happens to other stock sub-sectors?

In the past 10 years, the biggest gainers are:

  1. Industrials trade positive 71% of the time for an average gain of 0.7%
  2. Materials trade positive 68% of the time for an average gain of 0.4%
  3. The S&P 500 itself trades positive 65% of the time for an average gain of 0.3%

The worst performer are Gold Miners (GDX) which trade positive positive only 37% of the time, down an average of 0.8%.

The opposite is somewhat true when the jobs report underperforms by worse than 20,000 jobs.

There is significant outperformance from the Gold Miners (GDX), which trend up 55 percent of the time for an average gain of 0.4 percent. The S&P 500 trades down 0.1 percent on average.

Bottom line—when the jobs report surprises to the upside, the S&P trades up two-thirds of the time, with growth sectors like Industrials outperforming. When jobs miss, gold does well.

Disclosure: CNBC's parent, NBCUniversal, is a minority investor in Kensho.

»Read more
  Thursday, 4 Dec 2014 | 10:28 AM ET

Mario Draghi is all over the place on ECB action

Posted By: Bob Pisani

The Shanghai Composite is up 4.3 percent to another new high, and Hong Kong's Hang Seng rose 1.7 percent. There's no specific reason, but mainland China stocks have been surging since the market opened to foreign investors in a big way in early November.

The People's Bank of China has also been hinting at stimulus measures. Exchange volumes have increased dramatically. The Shanghai Index is up 37 percent year to date. Chinese energy names like PetroChina and Sinopec were up big, too.

Meanwhile, European Central Bank President Mario Draghi is all over the place.

European stocks weakened and the euro shot higher as the ECB chief said the the bank will reassess its current plan in the first quarter, implying that any initiative to purchase sovereign debt—which the market wants—was not imminent.

Draghi also made references to the ECB balance sheet today, saying that it is his "intention" to raise the balance sheet by 1 trillion to 3 trillion euros, but that is not a "target." If that sounds a little too subtle, it is in a normal sense—if not in central banker speak. It means the ECB may not be as aggressive as initially thought.

Read MoreECB's Draghi: 'We don't need unanimity for QE'

Draghi later said that the ECB was discussing buying all assets "except gold." Gold dropped, the euro began to weaken, and stocks began to come back.

»Read more
  Wednesday, 3 Dec 2014 | 12:00 AM ET

Strange stock market trades confuse Wall Street

Posted By: Bob Pisani

A strange series of very heavy trading in roughly a dozen stocks has Wall Street traders scratching their heads; here's what I think is happening.

It started at about noon ET. All the trades occurred in roughly the same time period—roughly noon ET to roughly 12:30 p.m.—and the volume in all the stocks was heavy, in most cases several times daily volume.

It all points to one likely explanation: somebody executed some kind of program.

But what kind of program? And was intentional, or did somebody mess up?

Some stocks (CPB, HRS) dropped; some (ADI, CAT, JOY, HRB) went up; others (CVC) went up fast, then down almost as fast.

Two other points:

1) Most of them recovered to a great extent,so most exhibit at least a partial V-shaped pattern.

2) They do not seem related by sector, or any other obvious metric. True, President Barack Obama was aggressively pushing infrastructure during a news conference at this time, so infrastructure stocks moving (CAT, JOY, TSCO) makes some sense, but that would not account for the moves in other stocks.

There are two possible explanations:

1) A Wall Street firm has updated one of its buy/sell lists for 2015. That does happen at this time of the year: many release lists of high quality stocks, or dividend screens, to private clients.

It's possible some firm did that and has not yet made it public.

2) Someone mis-executed a program trade. I say "mis-executed" because it is hard to believe that anyone who wanted to buy and sell a basket of stocks with significant volume would dump such a large amount on the market in such a short period of time. Any professional trader would execute such a basket over many hours, with careful attention to disrupt the price as little as possible. That's not even difficult to do: it is common practice.

As part of this "mis-executed" theory, it is also possible that a hedge fund accidentally started liquidating their portfolio, and then noticed it and reversed. How do you know? Because your profit and loss statement suddenly goes haywire.

Either that, or someone is trying to execute a series of pair trades and have no idea what they are doing. Seems unlikely.

Personally, I think somebody messed up. Professionals do not execute such sloppy trading deliberately.

»Read more
  Wednesday, 3 Dec 2014 | 10:31 AM ET

Earnings: Bourbon is in, apparel is out

Posted By: Bob Pisani

Bourbon is in, and apparel is out. That's the story if you look at the earnings picture today.

Abecrombie & Fitch cannot catch a break. Third-quarter earnings were about in line with expectations, but EPS of 42 cents is poor in comparison to last year's 52 cents. Traffic was weak, and with about 30 percent of sales coming from outside the United States, including Europe, is it any wonder?

Here's an understatement: Abercrombie & Fitch expects conditions to remain "difficult." Difficult? I would call lowering full-year guidance to $1.50 to $1.65 from prior guidance of $2.15 to $2.35 more than "difficult." I call it "lousy."

Read More10 things you didn't know about Kentucky & bourbon

We all know merchandise is not the hot item. Accessories and electronics are what's selling, but this goes beyond that. The merchandise is just not connecting with consumers. You can see that in the earnings and the comparable store sales declines.

It's enough to make you take up drinking. Speaking of drinking...

»Read more

About Trader Talk with Bob Pisani

  • Direct from the floor of the NYSE, Trader Talk with Bob Pisani provides a dynamic look at the reasons for the day’s actions on Wall Street. If you want to go beyond the latest numbers— Bob will tell you why the market does what it does and what it means for the next day’s trading.

 

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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