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Trader Talk with Bob Pisani

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  Friday, 7 Mar 2008 | 11:44 AM ET

Why The Stock "Nose Dive" Did An About Face

Posted By: Bob Pisani

What happened to our nosedive? After a down open, stocks continue to hold up well in what could only be described as a fairly flat market--about even number of stocks advancing to declining, modest volume, financials and techs modestly to the upside. Only a few metals companies like Freeport McMoran and Alcoa are down a couple percent.

So what happened? Fast money traders came in and aggressively bought financials at the open, then took profits a half hour later. Some financials shorts covered as well. Good for them. Now we need real money to sustain the move off the lows, and that's where we will likely have a problem. The general trend has been to buy dips, sell rallies, and believe it or not we did have a rally today.

But now we are in "sell on the rally" phase, and stocks are a bit weaker already. The concern is that we are now easily set up to drift lower for the rest of the day, as the fast money has already made money and may just sit on the sidelines.


Questions? Comments? tradertalk@cnbc.com

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  Friday, 7 Mar 2008 | 9:18 AM ET

S&P Futures Down 14 on Payrolls Report

Posted By: Bob Pisani

S&P futures down 14 on the nonfarm payroll report, which showed a loss of 63,000 jobs in February and downward revisions in December and January. That's two straight months of job losses (the first two-month drop in jobs since May and June 2003).

The Fed is raising the size of the March TAF auctions to $50 billion from $30 billion. Remember, these are short term loans (28 days) and their purpose is to provide additional liquidity to the system.

Ambac priced $1.25 billion of common shares at $6.75 per share (below yesterday's close of $7.42), and $250 million in mandatory convertibles, making good on their plan to raise $1.5 billion in capital. It is heavily dilutive, nearly tripling the common shares outstanding.

National Semiconductor up 6 percent as earnings met expectations. National Semi also said sales in the current quarter (Q4) would range from $440 million to $460 million (estimates are about $462 million).

Short-selling positions hit a record at the NYSE during the two week period ending Feb. 29.



Questions? Comments? tradertalk@cnbc.com

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  Thursday, 6 Mar 2008 | 1:05 PM ET

New Ways to Play Gold

Posted By: Bob Pisani

Gold's at a new high, what to do? How about shorting gold with a new Exchange-Traded product?

Talk about timing--a few days ago Deutsche Bank launched three new Exchange-Traded Notes (ETNs) linked to a gold index they maintain.

Wanna go long gold? How about doubling your bet? The DB Gold Double Long ETN gives you two times the monthly performance of the gold index plus a monthly T-bill index return, which is one of the factors that distinguishes an ETF from an ETN.

If this whole gold rally sounds suspect to you, weak dollar or not, how about shorting the whole thing? The DB Gold Short ETN offers the inverse of the old index plus a T-bill index return.

And if you're really convinced the rise in gold is a sham try the DB Gold Double Short ETN .



Questions? Comments? tradertalk@cnbc.com

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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.



Questions? Comments? tradertalk@cnbc.com

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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.



Questions? Comments? tradertalk@cnbc.com

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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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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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