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Trader Talk with Bob Pisani

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  Thursday, 5 Feb 2015 | 10:32 AM ET

Auto stocks are on a roll, but retail is mixed

Posted By: Bob Pisani
Daniel Acker | Bloomberg | Getty Images

We heard yesterday from AutoNation. Its rival Group 1 Automotive reported earnings of $1.67, well above expectations of $1.34.

This is important because Group 1 gets almost one-third of sales from Texas, where there was great concern that lower oil prices might cause a drop in car sales. Rest assured, they have not stopped buying cars in Texas!

Not just car companies doing well. The people selling parts are also performing. O'Reilly Automotive easily beat estimates and posted a strong 6.3 percent comparable store sale. 2015 guidance of 3 to 5 percent comparable store sales is also solid.

O'Reilly, by the way is one of the most aggressive buyers of their own share. In 2011, for example, they had roughly 140 million common shares outstanding. At the end of 2014, it was closer to 102 million, a decline of more than 25 percent.

That is a significant improvement to the bottom line. For example, the 2015 guidance of $8.20 to $8.35 works off the 2014 level of common shares; when adjusted for proposed additional share repurchases in 2015, the guidance becomes $8.35 to $8.45, according to Wedbush.

O'Reilly Automotive (common shares outstanding)

  • 2011: 140 million
  • 2014: 102 million
»Read more
  Wednesday, 4 Feb 2015 | 10:18 AM ET

Signs of bottoms, but watch earnings revisions

Posted By: Bob Pisani

I noted Tuesday that the markets have been rallying in the last few days because the four major sources of anxiety—oil, base metals, bond yields, and European equities—have shown signs of bottoming. A rare day of weakness for the U.S. dollar provided additional help yesterday.

Several of these trends have been building for a while. Oil has been hovering in the mid-$40s for a month, and Europe has been stronger since mid-January.

But the combination of all four trends together—aided by word that a deal with Greece may be possible and a breakout in oil to the $50s—has created a powerful rally. The S&P 500 has rallied 70 points from its high to its low in two days.

Read MoreUS services sector growth accelerates in Jan but new business at record low: Markit

Can it last? Lowry Research, the oldest technical analysis service in the United States (founded in the 1930s) issued a note to clients last night saying, in part, "the market reached an important low on Jan. 30th and has now embarked on a rally that should, at least, test the late Dec. bull market highs for the major price indexes."

Half way through earnings season, it should get easier.

Fifty percent of the S&P 500 have reported. Disappointing numbers from large banks and dramatic announcements of future production cuts and capital expenditure spending reductions from oil companies have greatly compressed earnings growth. We are looking at earnings gains of a little more than 2 percent for the S&P 500 for the fourth quarter, according to Factset.

What worries me is that earnings estimates are continuing to come down for the Q1, which is the quarter I really care about.

»Read more
  Tuesday, 3 Feb 2015 | 10:08 AM ET

Are commodities really bottoming out?

Posted By: Bob Pisani

The news on oil is still mostly bearish—BP announced a $3 billion cut in capital expenditures for 2015 on Tuesday—but analysts and strategists are again trying to call a bottom.

Raymond James' Jeff Saut told CNBC Monday that oil has indeed found a bottom.

This morning, following a disappointing earnings report from Anadarko Petroleum, Stifel upgraded the stock to a "buy" from "hold," saying it expects oil prices to improve in the second half of the year.

"We anticipate a rebound in oil prices as U.S. supply growth slows, demand improves, and the dollar potentially tops and begins to weaken over the next 12 to 18 months," Stifel analysts wrote.

Read MoreOil erases losses for 2015 as majors take action

Stifel is also raising ratings to a "buy" on several other energy names, including Concho Resources and EOG Resources. Importantly, the firm seems to be fairly clear-eyed on a bounce in oil: its 2016 projections is for an average price of $65 a barrel.

Speaking of bottoming, there are some early signs copper may be trying to do the same thing. Copper is down more than 20 percent in the last six months, not as bad as oil's 50-plus-percent decline, but still notable. However, it is up better than 2 percent today and has stabilized in the last few days around $2.50 a pound.

»Read more
  Monday, 2 Feb 2015 | 10:23 AM ET

ExxonMobil's earnings, buyback send a bad signal

Posted By: Bob Pisani

ExxonMobil reported fourth quarter earnings per share on Monday that were down about 18 percent from the same period a year ago. The company was doing reasonably well until the final quarter of 2014.

Indeed, full-year earnings for 2014 were up compared to 2013. That's because oil prices held up over $90 for most of the year, until the fourth quarter. The real problem is the estimates for 2015.

Exxon earnings:

  • 2012: $8.10
  • 2013: $7.37
  • 2014: $7.45
  • 2015 (est.): $4.28

Wow, that is a 42-percent drop in 2015 from 2014! Is there any wonder the stock is near a 52-week low and down 5.4 percent in January alone?

Read MoreExxonMobil earnings beats, but revenues trail

Also getting a lot of attention is the reduction in Exxon's buyback to $1 billion for the first quarter from $3.3 billion in Q4. But keep in mind the numbers have been coming down for several years:

Exxon buybacks (in billions):

  • 2011: $21
  • 2012: $21
  • 2013: $16
  • 2014: $12.9
  • 2015 (est.): $4

Still, that is a big drop. A $4 billion-per-year buyback (provided Exxon does $1 billion for all four quarters) is a drop in a bucket when you have a market cap of $370 billion. It's a rounding error.

»Read more
  Monday, 26 Jan 2015 | 9:53 AM ET

Hot topics at the annual Inside ETFs conference

Posted By: Bob Pisani
A man looks at a board showing currency exchange rates in Bern January 15, 2015.
Thomas Hodel | Reuters
A man looks at a board showing currency exchange rates in Bern January 15, 2015.

What are the hot exchange-traded fund investments for 2015? Here's what's got investment advisers talking at the annual Inside ETFs conference in Florida.

1) 2015: The year of the currency hedge.

The Swiss National Bank's surprise decision to abandon its currency peg with the euro, along with the imminent adoption of quantitative easing by the European Central Bank, has got global investors running to hedge currency exposure. Global banks everywhere are rushing to lower rates and cheapen their currency.

The hot ETF entering 2015 is the Wisdom Tree Europe Hedged ETF, which gives exposure to European stocks but hedges out the weak euro. It took in $5 billion last year and is still taking on assets. The difference between hedged and unhedged Europe was 12 percent last year.

Read MoreIs the euro the Charlie Brown of currencies?

This follows on the phenomenal success of the WisdomTree Japan Hedged Equity ETF (DXJ), which hedges out the yen and now has $12 billion in assets.

2) Low-volatility ETFs make a comeback.

The big worry at the conference is volatility. We are in for more of it. Already, the Dow Industrials has been trading in a 200-point range on a daily basis in January, well above the 2014 average of roughly 125 points.

There are concerns about the ripple effects of low oil, a possible Russian debt default, a Greek exit from the euro zone, and a possible shock to interest rates should the Federal Reserve decide to hike rates.

What does that mean? It means that minimum volatility products, which concentrate on stocks that will move the least in times of market turmoil, have again generated interest. The two biggest products are the S&P 500 Low Volatility and MSCI USA Minimum Volatility.

»Read more
  Friday, 23 Jan 2015 | 5:04 PM ET

The $2 trillion market everyone is talking about

Posted By: Bob Pisani

For the fifth year in a row, I am covering the ETF.com (formerly IndexUniverse) Inside ETF Conference in Hollywood, Florida, on Monday and Tuesday.

I've reported for years about the advantages of exchange-traded funds (ETFs): transparency, low cost, tax efficiency, intraday trading and the ability to easily buy into international stocks and bonds, as well as commodities.


»Read more
  Friday, 23 Jan 2015 | 10:12 AM ET

The sweet spot of the earnings cycle is near

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

I've noted that earnings expectations for both Q4 2014 and Q1 2015 have been coming down for weeks, particularly in energy and to a lesser extent in financials, as some of the bigger companies came in light. While this is normal, the extent of the downward revisions has been much steeper than normal. That is the main reason stocks have been off to a rocky start.

This is now starting to change as we enter the heart of earnings season.

My bet is that Thursday was the low point, and it was pretty low. On Dec. 31, the earnings growth rate was 1.7 percent. On Thursday, it was expecting earnings growth of only 0.1 percent, according to Factset.

Yuck. If that holds, it would be the worst quarter for earnings growth since Q3 2012, when we had a year-over-year decline of 1 percent.

Read MoreBig Board trading floor not closing: NYSE boss

But that is starting to turn around. As of this morning, the S&P 500 is expecting growth of 0.25 percent year over year.

Why? Because even though those that miss estimates get a lot of attention, on average 70 percent of companies beat estimates. And now that 88 companies have reported, we are starting to see that come out.

»Read more
  Thursday, 22 Jan 2015 | 2:06 PM ET

What markets do when ECB talks about buying assets

Posted By: Bob Pisani
A euro logo next to the headquarters of the European Central Bank.
Ralph Orlowski | Reuters
A euro logo next to the headquarters of the European Central Bank.

What happens when the ECB gets aggressive? Stock markets generally rally.

I was curious what happens to markets when the ECB starts talking about QE. Since this is the first time an actual program has been announced, we don't have any real history.

However, we have several moments where Draghi did speak about upcoming programs or hint at QE, beginning with his now-famous July 26, 2012 speech where he said he would do "whatever it takes" to save the euro.

We asked our partners at Kensho to look at what happens when the ECB has made such comments, or announced actions around reviving the euro zone.

There have been nine such occurrences since that "Whatever it takes" speech. One day after these announcements, the S&P 500 has traded up 100 percent of the time with an average gain of 1.4 percent, while the German market was up 89 percent of the time (8 of 9 times), with an average gain of 1.7 percent.

The peripheral countries show the biggest gains: Spain and Italy have traded up seven of the nine times, with average gains of 3.6 and 3.2 percent, respectively.

Not surprisingly, a big loser has been the euro, trading lower against the dollar four of the nine times.

»Read more
  Thursday, 22 Jan 2015 | 11:35 AM ET

Cloud-based storage firm Box set to price

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.

IPOs: first tech deal of the year. Cloud-based storage company Box (BOX) set to price tonight, seeking to sell 12.5 million shares at $11-$13

The good news: 1) hot space, 2) rapid growth (revenues up 80 percent in first nine months of 2014), large base of business customers (44,000).

The bad news: 1) lots of deep-pocket competition (Microsoft, Google, Amazon), 2) large losses with little prospect of turning green soon. According to the company's S1, "We have a history of cumulative losses and we do not expect to be profitable for the foreseeable future."

Still, the enterprise software IPOs have generally done well: Zendesk, Hubspot, New Relic, Hortonworks.

If Box is successful, you can expect to see Dropbox and others coming sooner rather than later.

Read MoreWhy money-losing Box is finally ready for IPO

»Read more
  Thursday, 22 Jan 2015 | 9:52 AM ET

ECB shoots the big bazooka: 1 trillion euros

Posted By: Bob Pisani
European Central Bank President Mario Draghi pauses while addressing an ECB news conference in Frankfurt January 22, 2015.
Kai Pfaffenbach | Reuters
European Central Bank President Mario Draghi pauses while addressing an ECB news conference in Frankfurt January 22, 2015.

I wrote on Wednesday that many traders were clamoring for a much bigger European Central Bank bond buying program than the plan to purchase 500 billion euros in assets that was being discussed. Draghi said the program would be 60 billion euros a month and last at least until September 2016.

Just do the math: 60 billion x 18 months = 1.08 trillion euros.

Read MoreOpen-ended European QE set to 'start with a bang'

Some portion of this may be previously announced buying, but the key is that Draghi made it clear that the terms were somewhat open-ended and could go on longer, "until sustained adjustment in path of inflation." Good luck with that.

It's close enough to open-ended, and close enough to the big bazooka.

Bond yields in the euro zone have dropped, the euro has weakened. However, European stock markets are up only modestly

If the goal is to weaken the euro to make it more competitive, then this program is a success at the outset.

»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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