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Trader Talk with Bob Pisani

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  Thursday, 6 Mar 2008 | 9:25 AM ET

Dollar Falls To New Low But Retail Rises In February

Posted By: Bob Pisani

The U.S. dollar hit a new low as the Fed's Pianalto says the U.S. economy has stalled . Dollar weakness again helping oil. Jumbo mortgage lender Thornburg Mortgage failed to meet a margin call of about $28 million which has triggered cross-defaults.

The Bank of England stuck to its inflation fighting credentials byleaving rates unchanged at 4 percent and the ECB did the same

Retail sales: Retailers reported retail sales for February up 2 percent , according to RetailMetrics. That is at the high end of expectations.

Discounters and club stores are doing very well:

--Wal-Mart beat up 2.6 percent, better than 1.1 percent. They expect March comps to come in between 0 to 2 percent (thanks a lot!), with some recovery in discretionary items.
--Targetwas a bit better.
--Costco , BJ's Wholesale , and Big Lots , which reported yesterday, were all better than expected.

Teen retailers mixed: Aeropostale and Hot Topic were better than expected, but American Eagle lowered first quarter estimates

Department stores struggling: JC Penney down 6.7 percent, well below expectations, Nordstrom's down 3.3 percent (3 straight months of negative comps for Nordstrom) Nieman Marcus down 7.4 percent.

Apparell mixed: Ann Taylor a little better than expected, but Gap, Abercrombie, Chico's worse than expected; TJX up 3 percent, a bit shy of expectations but still pretty good

March will probably be difficult for retailers, because last year Easter fell on the last day for the fiscal month and caught a long Easter selling period, so overall comps were up 6 percent, but this year Easter is very early and in years when Easter is early the colder weather has not usually benefited retailers.


Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 5 Mar 2008 | 4:11 PM ET

Ambac's Impact on Markets

Posted By: Bob Pisani

Ambac down 12 percent and the rest of the market dropped, as Ambac announced a $1 billion common stock offering and $500 million equity units (which must be converted to common stock by 2011).

Why the drop?
First, no white knight came in -- no bank that offered to bail them out -- which was a sign to investors.

Second, there may have been some disappointment that this deal was merely dilutive; some were hoping they might be bought outright.

Third, traders noted that this does nothing to relieve the negative outlook the ratings agencies have on them. There is the possibility that Ambac could need to raise more money in the next few months.

Finally, the company has announced that they are essentially in runoff, meaning they are taking in little if any new business -- even in the muni business. Also, they are paying $100 million in dividends to the holding company from the $1.5 billion in proceeds.



Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 5 Mar 2008 | 12:19 PM ET

Weak Dollar Lifts ALL Key Commodities

Posted By: Bob Pisani

I know that oil is getting a lot of buzz today: It's up 4 percent on reports that Venezuela is moving troops to the Colombia border and on a strong Dept. of Energy report on oil.

But the fact is that it is the weakness of the dollar -- another record low against major currencies -- that is lifting ALL major commodities today, with new highs in copper, silver, gold, and heating oil.

As a result, commodity-related stocks across the board -- including steel, copper, aluminum, gold, fertilizer, etc. -- are all up roughly 3 to 6 percent.



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  Wednesday, 5 Mar 2008 | 11:49 AM ET

Despite ISM, Some Sell Into Rally

Posted By: Bob Pisani

Despite the stronger ISM services index , the market is clearly seeing selling into the rally.

One active trader who went long late yesterday sold a portion of his gains this morning. While emphasizing he was not going back to shorting the market, he did say "we have not been getting paid to hold for big moves -- only trades."

When will he stop selling into modest rallies? "Until the market proves we can hold longer." There's the problem: Professional traders do not trust the rallies yet.

Nice move in oil service stocks, as Exxon Mobil has said they will keep capital expenditures above $125 billion for the next five years. Street has been long oil service stocks on exactly these assumptions.



Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 5 Mar 2008 | 10:50 AM ET

Top Indices Show Positive Signs

Posted By: Bob Pisani

All the major indices held key support yesterday -- particularly the S&P 500, which held the January closing low of 1310. That's a real positive, but we are still sitting at the bottom of a six-week trading range.

Elsewhere:

1) Oil and energy company profits will get a little more attention beginning today. That's because ExxonMobil holds its analyst meeting in New York, followed by Chevron and ConocoPhillips in the next several days.

They will of course opine on the big question--where is oil going, but the best response I have seen recently comes from Deutsche Bank analyst Paul Sankey, who said "oil will go as high as the dollar goes low, name your target."

2) Smithfield Foods is selling its beef-processing operations for $565 million to JBS, a Brazilian meatpacking company. JBS is making a play to become the nation's largest beef processor. A major factor helping JBS is the weakness of the dollar and the strength of the Brazilian real, which has appreciated 25 percent in the past year. For Smithfield, the move enables them to concentrate on higher profit businesses. Cattle prices -- which Smithfield does not control -- have been near record levels.

3) Several retailers reported earnings. Big Lots surprised everyone and gave first quarter and full year guidance for 2008 well above analysts' estimates. 2008 guidance is $1.70 to $1.80, estimates were for $1.53 a share. Up 16 percent pre-open.

BJ's Wholesale Club is also up, their earning beat expectations but they did not give guidance. However, they did cite strong January sales.

Saks' earnings were a penny below expectations, no guidance but they expected operating margins to remain flat and noted they were taking a "conservative approach to planning the business for the year."

Costco also posted earnings in line with expectations.



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  Tuesday, 4 Mar 2008 | 9:41 AM ET

Earnings Estimates--Lowering Shows Weakness Ahead

Posted By: Bob Pisani

I'm back blogging after some time off. Here's what's happening so far today.

Any way you look at it, the main story today is lowering earnings estimates. Whether you look at Merrill slashing Citi's estimates, or Intel cutting its gross margin forecast, or downbeat comments from Barnes and Noble and Staples , the implications of the commentary on these companies is that things are not improving and, in some cases, weakness may continue into the second half of the year. Citigroup looks ready to open at a new multiyear low.

First problem: first quarter estimates dramatically reduced by Merrill Lynch.

Two things important here:

1) Analyst Guy Moszkowski is an ax in this space (influential) and

2) He went from having one of the highest estimates to the lowest in one fell swoop. Merrill says they expect a loss in the first quarter and that there may be $15 billion in additional subprime related writedowns, and an additional $3 billion in writedown from other investments.

Moszkowski cut his estimate for the quarter to a loss of $1.66 (he previously forecast a gain of $0.55); current consensus estimate for Citi's first quarter is a gain of $0.37 (this is before the Merrill cut). Full-year estimate falls to $0.24 from $2.74.

Second problem: Sameer Al Ansari, CEO of Dubai International Capital, the investment arm of Dubai, said Citi may need additional capital. Citi got a little over $7.5 b from Abu Dhabi four months ago and over $14 billion in January from other investors, including the Kuwait Investment Authority.

Barnes and Noble has projected earnings well below analyst expectations. They are projecting earnings of $1.70-$1.90 a share, well below analyst estimates of about $2.13 a share.

A lot of traders have been playing the "first-half bad, second half better" game, but Staples today came out and said they saw no improvement in the second half of the year.

Finally, Bank of Montreal (fifth largest bank in Canada) took writedowns of over $360 million and made higher allowances for credit losses.



Questions? Comments? tradertalk@cnbc.com

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  Friday, 22 Feb 2008 | 7:43 AM ET

Out Of The Office

Posted By: Bob Pisani

I am out of the office and not on the trading floor for the next week or so. I will be back on March 4th, with new blog posts on what's happening. It will be interesting to see what's changed--or not--on my return. See you then.

Questions? Comments? tradertalk@cnbc.com

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  Thursday, 21 Feb 2008 | 9:24 AM ET

Oil Drops On Pickens' Comment--But Other Commodities Rise

Posted By: Bob Pisani

Oil dropped about $0.60 after Boone Pickens said that he was short oil on our air . Natural gas also dropped, as he said he was short that also.

However, gold, platinum, and palladium are once again at new highs this morning, and it's not just those: soybeans, steel, freight, iron ore, coal, are all at highs. Base metals like copper and zinc are strong as well. While materials stocks are up a bit this month, none of them are anywhere near new highs. There seems to be some kind of decoupling going on between commodities and the stocks.

JC Penneybeat their earnings expectations, though comp store sales decreased 2.3 percent . Guidance is so-so, the range for the quarter and the full year is just below analyst expectations; comp store sales projected to decline for the year. Remember, yesterday launched a whole new line, American Living--co-developed with Polo Ralph Lauren. See Margaret Brennan's Retail Detail post on this.

Sun Capital announced that they had acquired a 9.45 percent stake in Furniture Brands and was seeking to buy the whole company. They didn't say for how much, but they did say it would be at a "substantial premium" to the close of $10.18 a share. Up 16 percent pre-open.

Research in Motion up 10 percent pre-open, they said net subscriber additions would be 15 to 20 percent higher previously forecast. They affirmed their forecast.

Steel giant Arcelor Mittal said they were raising prices ; so is everyone else in the commodity world, it seems.


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  Wednesday, 20 Feb 2008 | 12:07 PM ET

Rio Tinto CEO Albanese: China Is Reason For Commodity Price Hike

Posted By: Bob Pisani

In case you are wondering why commodity prices continue to rise in the face of a U.S. slowdown, please listen to what Rio Tinto CEO Tom Albanese told our David Faber a short while ago. He discussed how China was continuing to suck up a greater and greater part of the world's commodity supplies, and concluded by noting that China now consumes:

--0ne-third of the world's aluminum
--0ne-fourth of the world's copper
--50 percent of the world's steel
--50 percent of the world's iron ore

The interview is here.

Wireless price war? Yesterday's announcement of a flat wireless rate of $100 from AT&T, Verizon,T-Mobile, done in response to fears that Sprint would announce a $60 a month plan, has driven Verizonand AT&Tto new lows.

There are two problems:

--Could accelerate a decline of wireline
--Price war in wireless

But that's not all. There's other issues:

--Residential broadband growth slowing
--Less consolidation opportunities
--Less certain regulatory environment (benign recently, now uncertain with the elections)

The problem here is that there has been an assumption that there will be robust growth in wireless revenues and EBIDTA. If pricing continues to move down, that assumption may now be out the window.

What to do? Some firms--including Atlantic Equities--are recommending the tower stocks, including Crown Castle and American Tower. They say the will benefit from the volume growth driven by unlimited voice and data plans.



Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 20 Feb 2008 | 10:29 AM ET

Asia Weak, Commodities Taking A "Break"

Posted By: Bob Pisani

Asia is weaker (Japan down over 3 percent). Some chatter abouta unit of KKR asking for restructuring of billions of dollars in short-term debt, reported overnight by the Wall Street Journal in Tokyo.

Commodities--including energy, base and precious metals--taking a breather this morning.

Unlike UBS,ING reported only a small impairment charge. Net profit was up 18 percent from a year ago. BNP Paribas also had a decent report.

Credit Suisse , a day after the big writedown of $2.85 billion, saw its price target cut by Lehman. HSBC, and Goldman Sachs.

Host Hotels beat on top and bottom line earnings (the metric for earnings is Funds From Operations), but gave guidance for the year below expectations. They are one of the biggest hotel REITs in the country and partner with the biggest luxury brand owners--Ritz-Carlton, Westin, St. Regis, Four Season.

Hewlett Packard up 4 percent as they beat both earnings and revenue estimates for the quarter. According to Pacific Crest Securities, notebook unit growth was 49 percent (!), deskktop sales also increased 15 percent. U.S. consumer demand softened in January, but international demand was strong. International sales account for about 69 percent of total sales for Hewlett. Bottom line: Global demand for PCs remains strong.

Chinese solar firm Suntech Powermissed on top and bottom line, down almost 20 percent as they provided very poor revenue guidance.They said they were impacted by the poor weather in China, as well as the Chinese New Year.



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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