GO
Loading...

Trader Talk with Bob Pisani

More

  Wednesday, 3 Sep 2008 | 3:15 PM ET

Commodities "Taking It" On The Chin

Posted By: Bob Pisani

The big discussion today revolves around the continuing route in commodity stocks...the decline is so steep and severe that it is fueling theories that a liquidation is occurring due to: 1) another commodity firm going out of business (most likely), 2) prime brokers telling clients they don't want them in commodities, or 3) firms that lend in the commodity markets pulling back.

Just look at the last two days: Freeport McMorandown 11 percent, Potash down 11 percent, U.S. Steel down 11 percent, Barrick Gold down 9 percent.

And that's just metals and agriculture. In energy, Arch Coaldown almost 25 percent, Foundation Coaldown 16 percent, Bucyrus and Joy Global(mining equipment) both down about 25 percent.

Oil service stocks are getting clobbered as well: Weatherford down 11 percent, National Oilwell Varco down 15 percent, Nobledown 9 percent, Tidewater down 8 percent.

Folks, that seems like a lot more than demand destruction to me.

In the middle of this, oil services giant Schlumberger said that it expects North American natural gas drilling to stay strong through 2009. The reaction? Stock goes from $86 to $87, still down 3 percent. Strange.

_____________________________
New!

- Track The Dow 30 Now

_______________________________________
CNBC's Names in the News:

Apple

Home Depot

_______________________________________


Questions? Comments? tradertalk@cnbc.com

»Read more
  Wednesday, 3 Sep 2008 | 11:26 AM ET

The Good News This Morning

Posted By: Bob Pisani

1) Oil continues to trend downward, and airlines are again among the most actively traded pre-open (I noted yesterday that oil is down 27 percent since its July highs but the S&P 500 is only up about 5 percent since its July lows);

2) the dollar rally continues, with the euro/dollar challenging the January lows;

3) mortgage rates have fallen to a 7 week low of 6.39 percent, and as a result applications to purchase homes rose 10.5 percent.

4) Home DepotCEO Frank Blake said “we’re getting awfully close to the bottom” of the housing downturn.

Still, looking for signs of a global slowdown has become something of a sport on Wall Street. Two signs today:

1) LG Display, a maker of LCD screens, said it would keep output at only 90 percent due to sluggish demand worldwide for flat panel TVs and computers. On top of slower demand, TV makers have been embroiled in a bitter price war that is squeezing margins for everyone in the business.
(Contd.)

_____________________________
New!

- See The Whole Dow 30

_____________________________

2) Paul Jacobs, Qualcomm's CEO executive, speaking on our air this morning, said there were some signs that consumers globally were holding onto their phones a little longer than expected before turning them in for newer models.

Elsewhere:

1) commodity hedge fund manager Ospraie Management said it would close its flagship fund. Lehman owned 20 percent of the fund. Separately Korea Development Bank proposed buying 25 percent of Lehman for up to $3.5 billion, according to newspaper reports.

2) GM President and COO Fritz Henderson said he expected vehicle sales in the U.S. to fall to the low-14 million level, down from 16 million last year. Separately, the company said they were extending the Employee Discount For Everyone plan for another month.

3) Furniture seller Ethan Allendown 6 percent, they announced earnings would be below expectations, noting that sales volumes were "substantially lower" in July and August.

4) ConAgra down 7 percent as they also announced earnings would be below expectations due to underperformance in the Consumer Foods division due to higher costs. Merrill Lynch and JP Morganlowered their rating.

_______________________________________
CNBC's Names in the News:
(Click on ticker for headlines)

Morgan Stanley

Coca Cola

_______________________________________


Questions? Comments? tradertalk@cnbc.com

»Read more
  Tuesday, 2 Sep 2008 | 5:34 PM ET

Why Tuesday Was a Let-Down

Posted By: Bob Pisani

There's no getting around it: Tuesday was a disappointment. A half hour before the market opened, oil was at $106, down about $9 and traders on the floor were anticipating that the Dow would hold onto what looked like a 200-point up day, the S&P a 20-point up day.

  • Video: Pickens Doesn't See Oil Below $100

But the high was right after the open, and we drifted lower from there, until a tech-led selloff just before 2pm ET ignited the final down leg in the market.

Why a disappointment? Because bears have successfully argued that the decline in commodities is due to the global slowdown. They say savvy stock investors know this: with oil down nearly $40 from its highs in July (a decline of 27 percent), the S&P has only managed to eke out a gain of about 5 percent since its July 15 low. That is a disappointment.

_____________________________
New from CNBC.com:

- See The Dow 30 Now

_____________________________

Bonds seem to have attracted the money that came out of the stock market. Bears note that a rally in bonds is in keeping with the global slowdown theme that was behind today's selloff.

_______________________________________
CNBC's Names in the News:

- Lehman Bros.

- Apple

_______________________________________


Questions? Comments? tradertalk@cnbc.com

»Read more
  Tuesday, 2 Sep 2008 | 12:07 PM ET

Great Commodity Unwind Picks Up Steam

Posted By: Bob Pisani

The Great Commodity Unwind of 2008, which began in July, picked up steam this morning. Remember the trade: investors have not only been long commodities, they have been long the currency of major commodity producers like Australia, and short the dollar. That unwind is now accelerating, with positive implications for U.S. consumers and stocks.

_________________________________________
Need To Know:

Where Oil Prices Head Next: Experts Weigh In

_________________________________________

Lower commodities, particularly lower oil prices, gives households more purchasing power. What would benefit most from that effect? Autos, housing and retailers -- consumer discretionary stocks, and that is exactly what is rallying today.

Financials are also rallying, since more purchasing power from consumers means more loans, fewer defaults.

But bears are urging reality check on all the bullishness:

1) we have not heard the end of the negative story on financials. Forget the credit crunch; how's business in general?
(Contd.)

_____________________________
New!

- Track The Dow 30 Now

_____________________________

Here's what Meredith Whitney at Oppenheimer said this morning:
"For example, last year during this time, almost $900 billion of mortgage backed paper was issued in the U.S. Year to date, the comparable number is $140 billion...While debt and equity underwriting volumes has grounded to all but a halt for several months now, trading volumes have now slowed materially. In August, trading volumes on each of the major exchanges were down double digits."

2) What about tech? As one trader noted, techs were preferred as an early "safe" play since most companies are not dependent upon debt and the credit markets for financing, and the sector has been a primary beneficiary of global growth. (See: "Ex-Bear: Time for Tech Stocks ")

But Dell's downbeat commentary has thrown doubt on the extent of global growth techs will see.

3) Finally, for the true cynics, let it be noted that we crossed 1,300 on the S&P 500 once again this morning; the first time we crossed it was in the beginning of 1999, almost ten years ago!

_______________________________________
CNBC's Names in the News:

- Alcatel-Lucent

- Google

_______________________________________


Questions? Comments? tradertalk@cnbc.com

»Read more
  Tuesday, 2 Sep 2008 | 9:34 AM ET

Dollar/Euro Highest Since Feb.; Commods Drop

Posted By: Bob Pisani

Stocks opened stronger in Europe on a generally more positive tone for stock markets; however, the economic weakness in Europe is front and foremost. The British pound is at the lowest level in two years: the Chancellor of the Exchequer said that the British economy could be in its worst slump in 60 years.

Dollar at the highest level since February against the euro.

_____________________________
New!

- Track The Dow 30 Now

_____________________________

Commodities are down across the board: not just natural gas down 7 percent, oil down 6 percent, gasoline down 6 percent, but also cocoa down 6 percent, platinum down 6 percent.

Ahead of the OPEC meeting next week OPEC may need to cut oil supplies by as much as 1.5 million barrels per day, or nearly 5 percent, Iran's OPEC governor said on Tuesday.

The commodity drop is having a predictable effect on equities pre-open:

1) airlines are catching a notable bid, with US Air, AMR , Delta , Northwest and Continental all up double-digits.

2) commodity stocks like Rio Tinto , BHP Billiton , Statoil, British Petroleum, and Harmony Gold are all trading down high to mid single digits.

Elsewhere:

1) Lehman Bros. up 7 percent after state-owned Korea Development Bank confirmed it was in talks about a possible investment. Note that the head of KDB, Min Euoo Sung, was the former head of Lehman's Seoul branch before he joined KDB in June.

2) financials in general are rallying.

3) re-insurers and some insurers in are rallying in Europe on Gustav not the event that was feared.


Questions? Comments? tradertalk@cnbc.com

»Read more
  Friday, 29 Aug 2008 | 5:41 PM ET

Bob Pisani's ETF Special Monday

Posted By: Bob Pisani

With $600 billion in assets, exchange-traded funds (ETFs) have become an increasingly popular investment alternative to mutual funds. What makes them attractive?

1) They are easy to trade – ETFs can be bought or sold on exchanges at anytime during the trading day

2) They often have lower expense ratios than many mutual funds, making them more cost efficient

3) They can quickly add diversification to an investment portfolio. Often containing baskets of stocks, ETFs can give portfolios exposure to different sectors and countries.

_____________________________
New!

- Track The Dow 30 Now

_____________________________

Additionally, what makes ETFs so appealing is their ability to provide investment opportunities beyond stocks. With ETFs, individual investors have easy access to asset classes like commodities (e.g., oil, gold, grains, etc.), currencies (e.g., Euro, Japanese Yen, British Pound, Chinese Yuan, etc.), and different categories of bonds. These can all be traded just like stocks using an ordinary brokerage account through ETFs.

But with over 600 ETFs to choose from, how do you build a solid, well-diversified investment portfolio purely using ETFs?

This Labor Day, we’ll show you how to build one. We’ll also delve more into the world commodity, currency, and bond ETFs and, explain why they should be a key part to your diversified investment portfolio.

Don’t miss Bob Pisani’s half-hour special on Monday at 12 noon ET.

_______________________________________


Questions? Comments? tradertalk@cnbc.com

»Read more
  Friday, 29 Aug 2008 | 5:14 PM ET

Dow, S&P Down -- But There's Good News

Posted By: Bob Pisani

The Dow and S&P were down slightly this week, but there was a lot of good news:

-- oil doesn't rally despite Gustav, Russia

-- economic news more positive

-- financials stabilize

-- dollar maintains strength

The bad news is what could be called the tech problem.

_____________________________
New!

- Track The Dow 30 Now

_____________________________

Remember, in mid-July, traders sold energy & materials, bought tech.

But now Dell says they see "conservatism" in tech spending. Techs were already a tough call on dollar strength, and slower global growth.

Bulls insist this is a Dell specific problem, that there’s no problem with Hewlett-Packard , and that economic data has been strengthening.

MAJOR INDICES THIS MONTH

-- Dow up 1.5 percent

-- S&P 500 up 1.4 percent

-- Nasdaq up 1.9 percent

_______________________________________
CNBC's Guest Blogger:

- Farrell: Is the Bear Bottom Behind Us?

_______________________________________


Questions? Comments? tradertalk@cnbc.com

»Read more
  Friday, 29 Aug 2008 | 2:24 PM ET

Dell/Tech Stocks, Gustav Nerves Weigh on Market

Posted By: Bob Pisani

CNBC producer Robert Hum is filling in for Bob Pisani Friday.

Markets have headed lower late in the morning and into the afternoon, primarily on the Dell and Gustav news.

Tech stocks have been struggling all day and lead the decline following Dell’s disappointing earnings report after the close yesterday.

While sales came in above expectations, the company’s margins were pressured by substantial price cuts, causing total profit to fall 17% from Q2 last year. Dell’s stock is paying the price, declining 13% today -- its worst 1-day percentage decline in nearly 8 years.

_____________________________
New!

- Track The Dow 30 Now

_____________________________

Crude oil prices and natural gas futures were higher this morning, but the markets have not had any help from energy stocks. Rising shortly after the open, energy stocks have fallen from their highs, as energy companies continue to prepare for tropical storm Gustav.

Sen. John McCain’s choice of Alaska Governor Sarah Palin as a running mate came as a surprise to many. Despite the morning weakness today, traders don’t attribute the triple-digit decline to the announcement.

While markets typically don’t like surprises, many noted that with the light trading volume today (and during the entire week for that matter), it’s difficult to immediately draw any conclusions on Wall Street’s reaction to the news. They advise to let the dust settle over the weekend and see what happens when most people return to work next week following the holiday weekend.

Keep in mind it’s also the last day of the month today. For the month: Dow up 1.9%, S&P up 1.7%, Nasdaq up 2.0%.

_______________________________________
CNBC's Names in the News:

Wachovia Bank

General Motors

_______________________________________


Questions? Comments? tradertalk@cnbc.com

»Read more
  Friday, 29 Aug 2008 | 9:50 AM ET

Energy Climbs on Gustav Fears; Japan's $18B Stimulus Plan

Posted By: Bob Pisani

CNBC Producer Robert Hum is filling in for Bob Pisani today.

Despite a lukewarm start Friday, stocks look to extend a 3-day winning streak today -- despite the Dow’s 240 point decline on Monday, the Dow is still up 0.75% (up 87 points) for the week.

Crude oil and natural gas futures are also up about 1.5% as Tropical Storm Gustav will likely be upgraded to a hurricane later today.

Overseas, India reported slower economic growth in Q2, but that was widely expected. Its growth of 7.9% was down from 9.2% in Q2 2007 and is now at its slowest pace since 2004.

Amid a stagnant economy and rising inflation, Japan’s government announced an $18 billion stimulus plan. With no announced tax breaks, however, this plan failed to impress many economists. The plan included proposals that ranged from expressway toll discounts to assistance to farmers and to part-time workers seeking jobs.

Elsewhere:

Fannie Mae and Freddie Mac each climbed about 6% pre-open. This extends the momentum they have had during their 4-day winning streak. On the week, Freddie is up 88% and Fannie is up 59%.

Deal or no deal? Hedge funds and Huntsman family members propose to provide at least $500 million to help finance Hexion’s stalled $6.5 billion bid of Huntsman.

However, Hexion, the affiliate of the Apollo Management private equity group, still maintains that the proposal would still fail to improve the solvency of a combined company. It has been a contentious past few months for the two companies after Hexion dropped its July 2007 bid a few months ago, and a Huntsman lawsuit against Hexion ensued.


Questions? Comments? tradertalk@cnbc.com

»Read more
  Thursday, 28 Aug 2008 | 4:45 PM ET

Confusion: Market Rally vs. Dell Disappointment

Posted By: Bob Pisani

The markets have staged an impressive two-day rally on:

--stronger GDP and durable goods
--lower oil, natural gas
--stronger financials

Still, the disappointing showing from Dell (down 10 percent after the close on a disappointing earnings report, noting that IT spending in the U.S. is conservative, and that conservatism is spreading to Europe) is a reminder that the global economic slowdown is not going away.

_______________________________________
New!

_______________________________________

If you are not confused, you're not paying attention. Traders are bitterly complaining that volumes on both equity and options exchanges are at pathetically low levels, levels that some haven't seen in years. This is more than seasonally slow trading, this is because the data is confusing.

Consider:

1) Two weeks ago, the economic news was grim and we were anticipating continuing poor data into 2009. Now durable goods and GDP have come in stronger than expected, and some are hopeful that next week's retail sales will provide better commentary on back to school than many have expected.

2) Two weeks ago, Fannie Mae and Freddie Mac equity was worthless, and the Feds were likely to bail out the company.

Today there's considerably less anxiety and many are now hopeful that if the two entities can successfully refloat a large amount of paper that is due in the next month, a final decision on federal involvement could be put off until after the election.

The hope for the bulls is that September (worst trading month of the year, and infamous for crushing rallies) will prove to be a turning point:

--that retail sales will actually surprise a bit on the upside, confirming the stronger numbers from GDP and durable goods, and most importantly

--fourth quarter EPS estimates, which have slowly been coming down, will stop their decline.

Bears say this is laughable, that this is the classic bull trap that has sucked traders in all year. The real estate market is about to take a leg down on higher rates, and the credit crises will deepen as delinquencies on credit cards, auto loans, and commercial real estate rapidly increase.


Questions? Comments? tradertalk@cnbc.com

»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.

Wall Street