Trader Talk with Bob Pisani


  Thursday, 17 Jul 2008 | 11:24 AM ET

Wachovia "Probe" Brings Down Market

Posted By: Bob Pisani

Financial stocks and the overall market moved a bit lower in the past few minutes on word that regulators have come to a St. Louis office of Wachovia seeking dcuments regarding marketing practices.

More than a dozen Wachovia agents have been subpoenaed, according to the Wall Street Journal. After initially dropping into negative territory, the Dow is now flat on the day.

Questions? Comments? tradertalk@cnbc.com

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  Thursday, 17 Jul 2008 | 9:34 AM ET

Market Bottom Finally In Sight?

Posted By: Bob Pisani

Are we at a bottom? Still not clear, but when you have rallies like yesterday, when you have Lowry, the oldest technical analysis service in the U.S., say to their clients, "The last two days appeared to represent a possible selling climax," you do get a lot of people nibbling, and today we are helped by Jamie Dimon and friends.

A Dow triple play--Coke,UTX,and JP Morganall beat expectations, but it is JP Morgan that is most important here.

We needed a follow-up after Wells Fargo helped ignite a rally in financials yesterday, and we got it from JP Morgan, which reported $0.54 vs. $0.48 expected (they reported $1.20 for the same period last year). No dividend increase, but Commercial Banking, Card Services, and Retail Financial Services were all up. Provisions for credit losses was $1.33 b, on the low end.

Mike Mayo at Deutsche Bank summed it up: "JPMorgan showed this quarter that it is one of the few financial firms

that are playing offense and showing revenue growth while many others are not."

JP Morgan up nearly 5 percent; Freddie Macand Fannie Maeboth us about 11 percent, Lehman up 9 percent pre-open.

To top it off, an important Northeast regional bank--PNC--also reported earnings well above expectations.


1) Futures also rose a few points when housing starts and building permits were both higher than expected.

However, a change in NYC building codes effective July 1st appears to have caused a spike in building; ex-Northeast the numbers are still weak. In theory, this is not bad news; we want fewer permits in order to work off the high level of inventory. Remember, Ben Bernanke said this week that stability in the housing market was the key to stability in the economy.

2) United Technologiesbeat and raised full year guidance.

3) Coke also beat, and even though volume in North America was flat , Eurasia and Latin America were both us 7 percent.

4) Continental up 4 percent, reported a loss of $0.25, half the loss of $0.48 expected. All right, a year ago they reported a profit of $2.10 a share, but it was still better than expected. Surprisingly, the company did note that it is comfortable with its forward bookings over the next six weeks. Remember, there are lots of capacity cuts coming from all the airlines. Offsetting this are the high jet fuel costs ($3.50 a gallon).

5) YUM! Brandsdown about 6 percent, as they reported earnings below expectations, large due to higher inflation.

Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 16 Jul 2008 | 4:17 PM ET

Buy Commodities, Sell Financials May Finally Be Over?

Posted By: Bob Pisani
The two factors moving the market today were 1) the drop in oil, now down almost 10 percent in two days, and 2) the rally in financials. »Read more
  Wednesday, 16 Jul 2008 | 11:19 AM ET

Energy, Material Stocks Appear To Have Topped Out

Posted By: Bob Pisani

The build in oil inventories is providing a rare, two-day drop in oil and a modest boost to stocks midday. Oil is down nearly 10 percent in the past two days.

On the decline in oil, airlines are rallying, and energy stocks are dropping notably for the second day in a row.

ENERGY STOCKS HAVE TOPPED OUT. As a sector, it is now safe to say that energy has topped out. Since hitting its historic high on May 21, the S&P Energy Sector is down 16 percent.

MATERIALS HAVE TOPPED OUT AS WELL. Material stocks are also looking toppy; since hitting its historic high on May 19th, the S&P Materials Sector is also down 16.6 percent.

BEATEN UP SECTORS LOOKING MORE ATTRACTIVE. At the same time, some beaten up sectors are starting to get attention. There is a lot of chatter about financials again today. Much was made of the fact that the Financial Select SPDR (the main basket of financial stocks) had its highest volume day in its history yesterday (started in 1999). Bulls obviously hoping this is some kind of bottom, but that's not at all clear. Volume is again very strong in the XLF and may again be a record.

It's not just financial stocks. Drug stocks, which endured a bear market of their own this year, have come off the bottom in the last month; on a strong earnings report, Johnson & Johnson is at a new high today. Other stocks like Schering-Plough are also strong in this sector.

Still waiting for some signs of life in retailers, autos, builders, and most industrials.

Finally, are mutual fund investors finally starting to panic, and if so what does that mean? According to Charles Biderman, who tracks fund flows at TrimTabs, they are. He says U.S. equity funds are seeing daily outflows of $1.5 billion in July. Is that a lot? Yes. There were outflows of $1.7 billion in the entire month of January. In the first nine trading days of July, there have been outflows of $13.4 billion. Mutual fund panic is often noted at market bottoms.

Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 16 Jul 2008 | 9:06 AM ET

Inflation, Stock Prices Worry Market

Posted By: Bob Pisani

Which is the Street more worried about--declining stock prices, particularly for financials, or inflation? It's both, and this morning's action illustrates that concern.

It's been a roller coaster of a morning, up on Wells Fargo, down on consumer inflation higher than expected.

Futures rose at 8 am ET as Wells Fargo announced earnings better than expected , and they raised the dividend 10 percent. They noted that their Net Interest Margin (the difference between the interest on assets and the interest paid on liabilities like deposits) increase, offsetting higher charge-offs. Up 13 percent pre-open.

Then the CPI report comes in hotter than expected , and we give up much of our gains.

Still, financial stock prices are a big worry. How bad is it? Consider that, according to one trader I spoke with, Lehman has raised $12.1 billion in capital in the past 3 months, but now has a market cap of only $9.18 b.

Dollar weak again today. Freddie Macand Fannie Mae both up about 8 percent pre-open.

1) Another large merger: iron ore producer Cleveland Cliffs is buying coal producer Alpha Natural Resources for $10 b in cash and stock. It amounts to about $128 a share, about a 35 percent premium to Alpha’s closing price of $94.92. The combined company will be called Cliffs Natural Resources, and will be one of the largest U.S. mining companies.

This is the THIRD fairly large deal done at a substantial premium in the last week after Dow Chemical-Rohm and Haas and Ashland-Hercules.

2) Mortgage applications rose for a third consecutive week , with a 30-year fixed rate mortgage at 6.22 percent.

3) Abbott Labs($0.84) was 6 cents ahead of expectations , and is also raising its full year guidance.

4) As noted yesterday, healthcare now has a higher market cap than financials in the S&P 500, for the first time since 1992.

Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 15 Jul 2008 | 4:14 PM ET

The Good And Bad From Today

Posted By: Bob Pisani

The good news is that oil finally cracked, which created a notable morning rally just about the time the market was heading south in a serious way.

Here's the bad news:

1) Financials, which showed a little bit of life early in the morning, sold off into the close, with both Fannie and Freddiedown about 25 percent;

2) Internals were poor: there were more than two stocks declining for every one advancing, and the nearly 600 new lows at the NYSE was the highest level since January. In other words, the rally wasn't so great, particularly into the close;

3) This did not feel like the bottom of the market. Rightly or wrongly, traders are dying to buy the market, but they are looking for some apocalyptic sign, some remarkable down day (500-600 points on the Dow) with massive volume, which has not come.

Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 15 Jul 2008 | 2:17 PM ET

Cox Confuses Traders On Naked Short Selling Of Fannie, Freddie

Posted By: Bob Pisani

SEC chief Chris Cox made a statement that is puzzling traders today.In verbal comments to the Senate, Mr. Cox said that he will institute an emergency order that will prohibit naked short selling in Fannie Mae and Freddie Mac.

Naked short selling is shorting a stock without actually borrowing it.

There are two reasons this statement is puzzling:

1) the rules are already in place regarding naked short selling; and

2) there is no evidence that naked short selling is widely practiced regarding Fannie and Freddie.

First, the government appears to be trying to enforce rules that are already in place. In general, it is a violation of federal securities law to short a stock without first borrowing it. There are some exceptions to this, for example in the case of broker dealers, but in general you cannot short a stock without first borrowing it.

While this may have been lightly enforced, it is strongly enforced by prime brokers.

With that said, how big a problem is it with naked shorts in Fannieand Freddie? These are among the most liquid stocks in the country; it is not difficult to borrow the stock to short it, fully covered.

Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 15 Jul 2008 | 12:31 PM ET

What Brought The Market Off Its Lows

Posted By: Bob Pisani

Markets have come well off their lows on two developments: 1) a rally in financials, which have brought stocks like Citigroup from positive to negative territory, and 2) a notable move down in oil, which has brought down energy stocks but rallied the overall market. GM, for example, has moved from a low of $8.81 to nearly $10, and up 6 percent.

The two most significant financial stocks of the moment--Fannie Maeand Freddie Mac, both remaining down but are also well off their lows.

Still, this is still a weak day, with three stocks declining for each advancing.

Among many issues, Mr. Bernanke addressed the widely held belief that speculators are somehow to blame for the recent runup in commodity prices. While acknowledging that investor interest in commodities has increased, he noted that if speculators really were pushing prices up beyond which supply and demand would dictate, inventories of oil should be increasing, but we are seeing the opposite: inventory levels are down. He also noted that many commodities, like iron ore, that are not traded on futures markets, have had very large increases in prices, so the evidence for manipulation is "very weak."

Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 15 Jul 2008 | 11:31 AM ET

Bernanke's Important Points On Solving Problems

Posted By: Bob Pisani

We are seeing a modest rally, led by financials. Lehman, for example, has gone from $12 at its bottom shortly after 10 am ET to just about $14, up 11 percent, though most other financials remain in negative territory. Fannieand Freddie remain down over 20 percent, but off the lows of the day.

The recent weakness in oil is causing energy stocks to drop; GM however has rallied as oil has declined.

Mr. Bernanke is making important points on how to find a way out of the current problems. He made it clear that stabilizaiton of new home construction in late 2008 or 2009 is the critical issue, though he made it clear that house prices may continue to fall because of the large inventory of unsold homes. He also made it clear that strengthening the GSEs is of vital importance.

When questioned on the global economy, Mr. Bernanke said he expects "some moderation, but still healthy growth." This might weaken the contribution of exports, but it might also reduce commodity prices, which would be a positive.

Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 15 Jul 2008 | 10:16 AM ET

Bernanke Speak Sending Stocks Lower

Posted By: Bob Pisani

Mr. Bernanke's somewhat downbeat commentary on the economy is sending stocks to their lows for the day. In particular, the most vulnerable group--financials, are again under attack. Fannie Mae and Freddie Mac both down more than 20 percent, but other large financials like Citigroup and AIG are down 9 and 11 percent, respectively.

Large industrials like Cummins, Honeywell, and CSX are also weak.

The NASDAQ has also hit a new two year low.

If this continues, we are heading toward a 90 percent downside day, where 90 percent of the volume is on the downside, one of several that have occurred in the past few months.

As a result of the battering in financials, healthcare stocks this morning have passed financial stocks in terms of their weighting in the S&P 500. Here's the weighting of the four largest sectors:

Techs 16.6%
Energy 15.9%
Healthcare 12.9%
Financials 12.8%

Questions? Comments? tradertalk@cnbc.com

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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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