Trader Talk with Bob Pisani


  Thursday, 17 Apr 2008 | 1:05 PM ET

New ETFs: Keeping Track Of International Exchanges

Posted By: Bob Pisani

The markets might be off to a painful start this year, but new ETFs keep coming out. The latest out just this week is a whole suite of ETFs that track several key international exchanges.

They're called NETS, which stands for Northern Exchange Traded Shares, and they're from Northern Trust, one of the leaders in institutional index management.

Here's a list of the NETS Indexes:

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  Thursday, 17 Apr 2008 | 9:13 AM ET

Earnings Not Much Help For Markets

Posted By: Bob Pisani

Mixed reports on earnings this morning; IBM is a help, but Pfizer , Continental Airlines , Marriottand Nokia are not.

Merrill Lynch recorded another $9 b in write-downs on mortgage-related assets, leveraged loans and hedges.

The net loss of $1.97. b ($2.20 a share, expectations were for a loss of $1.96), was the third straight quarterly loss. Both equities and fixed income revenues were below expectations. Also announced a 10 percent head count reduction (about 4,000 jobs). CEO Thain is making both cautious and soothing comments on the conference call, saying he is planning for a slower, more difficult next few quarters, but is optimistic about fiscal y ear 2008.

Pfizer 61 cents, a nickel below expectations, also missed on revenues . Sales of big drugs like Lipitor and Celebrex look below expectations. Not a good start for pharmaecutical earnings. Down 4 percent.

Continental Airlines reported a loss, no surprise since jet fuel costs were up over 50 percent, but it was not as bad as analysts had predicted. They are taking more planes out of service and reducing capacity. They were not terribly downbeat, however. Southwest Airlines reported a small gain.

Marriott cut its earnings outlook for 2008. Once again, growth is international. Revenue per available room (REVPAR, the standard metric) grew only 2.3 percent; international REVPAR increased 18.5 percent (these are for company-owned hotels).

United Technologies reported earnings slightly above expectations and reaffirmed its 2008 earnings guidance.

UBS' CEO is sounding optimistic this morning, says he doesn't think they will need to raise more capital, and that signs of improvement are starting to appear, but that it will take several more months to exit from the crises.

Nokia reported earnings about in line with expectations , but noted that average selling prices continue to decline, and they seem to have lost market share. Down 11 percent pre-open.

Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 16 Apr 2008 | 4:58 PM ET

IBM Services: The Real Surprise

Posted By: Bob Pisani

IBM up about 3 percent after the bell to a new multi-year high on earnings that beat expectations.

The surge is not just about the beat -- but how they did it: hardware was flat, as expected (there were fears it would be weaker), software was strong, and services (more than half of revenue) were very strong.

There had been fears about services, since about 25 percent of the revenue from services was from financial firms -- and some worried that the financial firms might have cut back on their use of IBM's services. Didn't happen.

IBM also raised its full-year guidance ; S&P futures up about 5 points on this.

Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 16 Apr 2008 | 4:10 PM ET

A Broad And Deep Rally: Here's Why

Posted By: Bob Pisani

Steady as she goes! Stocks retained their early gains and closed at the highs for the day. We had over 100 new highs at the NYSE, the highest numbers since November. Dow, S&P again approaching break-out range.

The rally was broad and deep. There were several motivating factors:

--Techs up on Intel .

--Financials up on in-line bank earnings from JP Morgan, Washington Mutual .

--Material stocks like metals and mining, steel, agricultural stocks up on continuing commodity surge;

--Transports: 8 month highs (up 4.1 percent) on a terrific report fromCSX. Railroads hit new highs across the board

Lagging: defensive stocks like Coke (despite good earnings),Altria ,P&G .

IBM closes at a new high; lots of bulls expecting earnings to be ok after the bell.

Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 16 Apr 2008 | 9:15 AM ET

Earnings Show Financials Are Still Key For Markets

Posted By: Bob Pisani

Now that we are starting to get into the heart of earnings season, the news is looking a little better (thank heavens!). Intel is a big help , but the financials are the key here. After what happened with GE and Wachovia, the Street was primed for all sorts of bad news, which--at least today--has NOT materialized:

--JP Morgantalked about "solid business momentum and our capital position remained strong" but was cautious on the economy . Up 2 percent pre-open. I'm not trying to gild the lilly here; earnings were down about 50 percent, but it was not worse than expected.

--Wells Fargotalked about "balance sheet strengthening", acknowledged that losses from home equity loans had increased . Up 8 percent pre-open.

--Washington Mutual reported a loss of $1.40; not good, but it was in line with guidance they had provided.


1) What global slowdown? Chinese GDP up 10.6 percent, slightly higher than expected. They raised reserve requirements.

2) It hurts, but it's good news: March housing starts weaker than expected, the lowest since early 1991; more importantly permits were below consensus at 927 thousand, also the lowest since 1991. This is bad for GDP but good for getting the inventory levels down. CPI in line with expectations, but still elevated.

3) Commodity inflation is a big problem. Potash up 4 percent pre-open; they just announced an agreement with a Chinese fertilizer to supply potash at prices $400 per ton higher than in 2007. In other words, potash (and fertilizer) prices just keep going up.

Speaking of commodity inflation: copper up 3 percent, near a new high.

4) JC Penney's CEO, Myron Ullman, said that he did not have enough visibility to provide guidance. He spoke at an analyst meeting. Down 1 percent pre-open.

Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 15 Apr 2008 | 5:00 PM ET

Trader Talk: Intel Guidance Gives Cheer

Posted By: Bob Pisani

Finally, a little bit of good news -- from Intel , trading up 7 percent after the close. (IBM reports tomorrow.)

Why no rally from the airlines, despite the Delta -Northwest merger? Traders, to a man, pointed to oil: Jet fuel has now passed labor as the No. 1 expense for airlines.

In the last three weeks, five U.S. carriers declared bankruptcy: Skybus, Aloha, ATA Airlines, Champion Air and the latest, Frontier Air. They declared bankruptcy because they cannot make money selling seats at the current prices with oil at a record.

Morgan Stanley's airline analyst, Willliam Greene, had to say to his clients this morning: "Our rule of thumb is to look for opportunities to become sellers once consolidation momentum has run its course, because airline mergers are inherently risky."

Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 15 Apr 2008 | 11:59 AM ET

Airline Mergers: A Dismal Assessment

Posted By: Bob Pisani

With all the talk about the benefits of airline mergers, there are some sad realities around this entire business.

Here is a somewhat downbeat -- and controversial -- assessment about what all these airline mergers might really mean, from Peter Schiff, president of brokerage firm Euro Pacific Capital:

"The recently announced mega merger between Delta and Northwest may usher in a newer, harsher era for the American airline industry.

"In truth, given the rising costs of building, flying, and servicing aircraft, U.S. carriers currently supply more planes and passenger miles than American consumers can afford to utilize. While this may seem illogical, given that domestic flights are usually fully booked, it is important to realize that these crowded planes do not translate into profit at current ticket prices.

"While mergers may help the airlines hold down costs for a bit, the only lasting pathway to profit is fewer flights and significantly higher ticket prices. Of course, this will mean that Americans of modest means will travel less by air. Unfortunately, that fact is simply an inevitable consequence of a sagging currency and diminishing national wealth."

Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 15 Apr 2008 | 10:51 AM ET

What Really Moves The Markets? It's All In The Hormones

Posted By: Bob Pisani

My favorite story today: research from the University of Cambridge concludes that much of the daily movements of financial markets may be correlated with hormone levels, specifically of testosterone (aggressiveness) and cortisol (stress).

The researchers took saliva samples from 17 male traders on a trading floor in London over the course of eight days, tracking it against the amount of money they made or lost, and against the changes in the market. They concluded that traders who had elevated levels of testosterone when they came to work made more money, but only to a point; testosterone levels that were too high led to reckless decision making.

Cortisol levels--which measures stress but also can be an indication of cautiousness--were particularly elevated in times of market volatility.

"Maybe bubbles and crashes are coming from these steroids," one of the authors, John Coates, said in New Scientist. He went on to say that "maybe if more women and older men were trading, the markets would be more stable."

Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 15 Apr 2008 | 9:16 AM ET

The Earnings "Surprise"--There Was None

Posted By: Bob Pisani

Futures actually moved up at 8:30 ET, despite PPI much stronger than anticipated (core PPI was in-line, apparently because car and truck prices were dropping; the NY Empire State Index was stronger than expected).

The most important fact about today is that there were no negative earnings surprises. State Street , US Bancorp ,Northern Trust in the financials, and Johnson & Johnson in the healthcare sector were all names people have been hiding out in expecting good earnings, and they delivered. This is in contrast to the disappointing start of this earnings season, with disappointments from GE ,Alcoa , and Wachovia .


1) So the long-awaited merger of Delta and Northwest is a reality (at least the announcement is real). The positives:

--Nearly $7 billion in cash at closing
--Minimal overlap that should ease the regulatory review process
--A deal in place with the Delta pilots
--12 percent reduction in headcount.

Now that consolidation looks like a reality, expect considerable opposition from labor groups; any anti-trust review must consider the consolidation play holistically. How about Continental/United ,which would be another roughly 20 percent of the market?

Before everyone gets too excited about this, consider what Morgan Stanley's airline analyst, Willliam Greene, had to say to his clients this morning: "our rule of thumb is to look for opportunities to become sellers once consolidation momentum has run its course because airline mergers are inherently risky." Still, the "Delta domino effect," as Greene calls it, will at least create some short term tailwind.

Delta up 5 percent, Northwest up 10 percent pre-open.

2) Johnson & Johnson beat on consumer sales, medical devices were also strong, pharmaceutical sales look in-line. 2008 guidance is in-line with expectations. Once again, international growth is the driver:

--Pharmaceutical sales in the U.S. up 0.9 percent, but up 7.9 percent international
--Medical devices up 0.2 percent in the U.S., but up 13.8 percent internationally
--Consumer sales up 11.7 percent in the U.S., but up 20.2 percent internationally

Up 1 percent pre-open.

3) US Bancorp up about 3 percent, as they beat on the topline and bottom line. One trader in the stock noted to me that USB was very much in line and because it it well capitalized and therefore less shorted than others, he is expecting it to be up but not a 10 percent short squeeze.

Questions? Comments? tradertalk@cnbc.com

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  Monday, 14 Apr 2008 | 4:04 PM ET

Financials: It Could Have Been Worse, But Will It Get Better?

Posted By: Bob Pisani

It could have been worse. Wachovia'shorrible earnings report, along with a dividend cut and a $7 b capital raising effort, dropped many financials two to six percent or more, with small regional banks that have significant real estate exposure particularly hard hit.

While the largest financials, like JP Morgan ,Merrill , and Bank of America , were not hurt as badly, they still declined; they have been down now for five days in a row ahead of their earnings this week. Bottom line: the Street is anticipating poor results, and Wachovia has only confirmed that the earnings estimates, while dramatically lower than a couple months ago, are still too high.

Wachovia also confirmed that there will likely be little good news this quarter:

--Deteriorating credit quality spreads to auto, credit cards?
--Weak revenue growth
--Capital markets weak
--Reserve building

Will anybody report an improvement? Bears are openly skeptical. They point to JP Morgan's comments that home equity continued to see deterioration, and our parent GE noting that the end of March got worse.

What to do? The answer to every question (what to buy? is my job secure? what is the meaning of life) seems to be, "Buy Potash." And oil exploration stocks. Both of these groups (agricultural commodities, exploration and production) again hit new highs today.

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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