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Trader Talk with Bob Pisani

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  Thursday, 7 Feb 2008 | 4:45 PM ET

Market "Jinx" Broken, But Troubles Still Hanging Around

Posted By: Bob Pisani

The good news is that we broke the three day jinx and did not end at our lows for the day. More good news: retailers for the most part did not drop, despite poor January sales.

The bad news: a stronger midday rally was quashed. Worse, selling intensity picked up notably at the top, which occurred right after 2 PM ET.

In other words, traders sold right into the rally, heavily.

This illustrates the central problem: buying conviction (demand) is not that strong. Absent some catalyst (like dramatic rate cuts) that sends sellers temporarily to the sideline, supply of stock (i.e. sellers) is readily available.

This means that the stocks that rallied most off the January bottom--retailers, financials--are in a bit of a no-man's land right now.

What will get things moving for these sectors? This may be a stock by stock, in the trenches event.

Two examples:

1) JC Penney , which kept inventories under control, raised guidance,
2) Deutsche Bank , which hedged much of its subprime exposure and reported almost no writedowns. This is not sign of a bottom for the sectors, but it is a sign that some companies are working through the problems.


Questions? Comments? tradertalk@cnbc.com

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  Thursday, 7 Feb 2008 | 9:19 AM ET

Tech And Retail Stocks Under "Microscope"

Posted By: Bob Pisani

I've noted that when you are in this kind of uncertain market, everyone becomes a technician. There's a lot of attention now focused on tech stocks, now that both the NASDAQ and NASDAQ 100 have broken to 52-week lows.

For example: Google needs to hold above this week's low ($488.52 intraday). Microsoft is barely above its August low.

Many heavily traded techs are already below support levels. Apple , for example, broke below support yesterday and is now at its lowest level since August; same with Bidu .

Unfortunately, Cisco is not helping. While the numbers were OK, during the conference call the company did indicate that there was a falloff in orders during January. Down 10 percent to a new low.

Elsewhere:

1) Retail sales. According to RetailMetrics, January comp store sales were up only 0.2 percent ; first time since Feb-March 2003 with back to back growth below 1 percent.

Wal-Mart sales were up 0.5 percent, well below the 2 percent growth expected; also worse than expected were Limited, Nordstrom (down 5 percent pre-open), Target (who is forecasting February sales down 1 percent to up 1 percent), American Eagle (but they affirm their fourth quarter forecast), Pacific Sunwear (also affirms forecast).

Gap was a pleasant surprise. They beat by a wide margin: up 2 percent vs. a decline of 5.8 percent expected. Aeropostale (affirms fourth quarter), Saks,Ann Taylor were a also a bit better. Ann Taylor said, "To keep our inventories turning, we were promotionally aggressive during the month".

JC Penney also said sales were down, but better than expected; guidance is also higher than expected; up 6 percent pre-open.

Remember what we have seen recently: Talk about restructuring at Macy's,Talbots will close 100 underperforming stores, Freds is closing 75 stores, Hot Topic will open fewer stores, Charming Shoppes is closing 150 stores and cut 250 jobs, Ann Taylor will have fewer store openings, and cutting HQ staff.

2) Expect semis to be weak again as chip maker Infineon reported revenue below expectations; the SOX (semiconductor index) is already at a 4 1/2 year low. Down 16 per-open.

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  Wednesday, 6 Feb 2008 | 4:34 PM ET

Markets Close Low Again: Blame The "Change" Game

Posted By: Bob Pisani

Ugh, again. Markets closed on their lows for the third day in a row. What's the problem? Simply put, there's worry that things are changing fast, and that earnings and guidance are going to have to change.

A good example: Bear Stearns downgrades GM and Ford , arguing "The facts are changing at an accelerating rate." That's the problem, and it's just as relevant to the rest of the market.

Short-term, the markets moved down because traders were worried about how many things will be coming out before the market opens tomorrow: Cisco(which looks OK, but conference call is coming ), Deutsche Bank earnings, ECB/Bank of England, and retail same store sales.

Talbots guidance is poor after the bell, for the quarter and the year.

Elsewhere, bond insurer MBIA finally announcing an effort to raise capital: $750 million.


Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 6 Feb 2008 | 2:47 PM ET

Market Drops: One Analyst's Opinion On What Happened

Posted By: Bob Pisani

What caused the big market drops that began in August of last year? There’s a fascinating interview with Andrew Lo, director of MIT's Laboratory for Financial Engineering, in the new issue of Technology Review.

He says that the growing complexity of world markets makes "aberrations" like SocGen more likely to rock markets, but he makes a very interesting point about the start of all this volatility, back in August.

Remember all the craziness that began last August 7th and continued for several days? Here's his take on what happened:

--A large number of quantitative equity hedge funds lost money on those dates simultaneously, but no obvious market event occurred;

--It's likely that one large quantitative equity fund decided to unwind its portfolio, probably related to credit problems from the subprime mortgage market;

--The liquidation had a negative impact on other similarly positioned quantitative funds;

--A snowball effect ensued, with quant funds exiting at the same time.

Thus, there was no market "crash," just quant funds that were too similarly positioned.



Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 6 Feb 2008 | 10:24 AM ET

Financials' Rally In January Under "Scrutiny"

Posted By: Bob Pisani

The financials pulled off an amazing V-bottom in January, but that rally is now being aggressively questioned. Keefe Bruyette & Woods has an interesting note out skeptical of the rally. They noted:

--The bank stock run in January was based on speculation about potential benefit to banks from aggressive Fed easing: "We think enthusiasm will be ratcheted back as investors revisit fundamentals."

--Large-cap bank stocks are up 6.5 percent year to date versus a 6.1 percent decline for the S&P 500 (!)

--January was the first month in which large-cap banks outperformed the market since February 2007 (!!)

--Relatively high valuations and a high probability of further estimate cuts do not bode well for performance.



Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 6 Feb 2008 | 9:17 AM ET

Markets Feel January Lows Will Soon Be Tested

Posted By: Bob Pisani

Futures are up slightly after yesterday's 90 percent downside day. The problem with yesterday is that it clearly reinforced the notion that we are still in a downtrend; many now expect the January lows to be tested. The Dow is down nearly 500 points in the last two trading sessions.

Elsewhere:

1) I said yesterday an offer was imminent from BHP for Rio Tinto ,and it did come. Unfortunately, BHP offered only 13 percent more than their initial offer; this was well below the 20 to 30 percent improvement many felt was necessary to make the offer a "can't refuse" proposal.

Aluminum Corp of China and Alcoa , which own 9 percent of Rio Tinto, are the question marks. They have the Chinese government in the form of funding from China Development Bank behind them, and it is clear China does not want the power that a combined BHP-Rio deal would represent. China is a net importer of iron ore, remember, and they don't want so much control in one company.

Another wrinkle: there is now talk that Japan's anti-trust watchdog may also oppose the deal and has begun talks with its European counterparts to stop the deal.

Elsewhere:

1) Disney up 5 percent as they beat estimates, revenues also stronger than expected ; unfortunately the report offered no guidance. However, several of their divisions turned in strong performances; Parks and Resorts were up 11 percent, for example. Consumer Products were also strong.

2) Time Warner reported earnings roughly in line with estimates, and said they expect adjusted EBITDA growth of 7-9 percent (EBITDA, a rough measure of cash flow, is the standard metric for valuing media companies).

3) Kelloghas reaffirmed their full year earnings guidance. Kellogg, along with many food companies, have complained about the greatly increased costs of grain and other commodities; they noted that they have hedged approximately 70 percent of its commodity exposure.


Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 5 Feb 2008 | 6:00 PM ET

The Election & Your Portfolio: A Primer

Posted By: Bob Pisani
Not paying attention to the elections and how it might affect your portfolio? Shame on you! Here's a brief primer: health care, tobacco, Fannie Mae and more... »Read more
  Tuesday, 5 Feb 2008 | 11:16 AM ET

ISM Report: Nailing The Recession Coffin Shut?

Posted By: Bob Pisani
Bears are arguing that the ISM Services report--well below expectations--is the final nail in the rescission coffin. We now have several very weak data points in the last week: ISM Services, nonfarm payrolls, and new home sales. Only durable good orders recently have been above expectations. »Read more
  Tuesday, 5 Feb 2008 | 9:08 AM ET

YUM Proving Importance of Global Growth

Posted By: Bob Pisani
Want to see how important global growth has become? YUM Brands beat, but look at the growth: mainland China same store sales up 17 percent, 5 percent growth worldwide, 1 percent in the U.S. YUM now gets nearly 45 percent of its sales outside the U.S. »Read more
  Monday, 4 Feb 2008 | 4:46 PM ET

Stocks Slightly Weaker; Blame Banks, Builders

Posted By: Bob Pisani
Stocks were modestly weaker Monday: Rotation today out of financials, builders, retailers, back into drugs and energy. Volume light. Banks down 4.0 percent, builders down 4.0 percent, retailers down 2.7 percent... »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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