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Trader Talk with Bob Pisani

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  Friday, 1 Aug 2014 | 11:37 AM ET

IPOs keep coming, but price pressures emerge

Posted By: Bob Pisani
Part of the Mobileye driving assist system is seen on the dashboard of a vehicle during a demonstration for the media in Jerusalem.
Baz Ratner | Reuters
Part of the Mobileye driving assist system is seen on the dashboard of a vehicle during a demonstration for the media in Jerusalem.

Don't let Mobileye's (MBLY) big debut fool you--there has been a deterioration in IPO pricing recently.

True, it is a great day for the Israeli company, which priced 35.5 million shares at $25 and opened at $36. Wow.

If you just look at the basic numbers, it doesn't look bad for IPOs. Of the 176 IPOs that have priced as of yesterday, 105 (60 percent) are trading above their IPO prices, according to Renaissance Capital.

But that masks a significant deterioration.

IPOs all wet as tidal wave of new offerings loom

Since July, there have been 34 IPOs priced. Of those, 12 have been biotechs (35 percent).

Only 20 percent of those biotechs are above their initial price, compared to 44 percent for non-biotech IPOs.

That is a bad trend all-around.

On top of that, several biotech IPOs have been postponed: Lantheus Holdings (LNTH) and Mapi-Pharma (MAPI) were postponed, Micro Balin (MAPI) was put on day-to-day status, and Tobira Therapeutics (TBRA), Zosano Pharma (ZSAN) and Atara Bio (ATRA) were pushed into next week.

So why are so many biotech IPOs still coming? According to Renaissance, many biotechs are getting done because the venture owners are putting new money in at the IPO price to get the company public (and mark up their portfolio investment?) and pharmaceutical acquisitions are keeping up the odds up of a potential winner.

»Read more
  Friday, 1 Aug 2014 | 9:34 AM ET

Inflation hawks get beaks tied by tame US data

Posted By: Bob Pisani
Job seekers line up to meet with recruiters during the Job Hunters Boot Camp in San Mateo, Calif., in October.
Getty Images
Job seekers line up to meet with recruiters during the Job Hunters Boot Camp in San Mateo, Calif., in October.

After Friday's weak data, monetary policy hawks have a little less to crow about.

July's nonfarm payrolls data of 209,000 was below expectations of 230,000 though there were upward revisions in May and June. Meanwhile, hours worked remained unchanged. The result is a perfect combination of a disappointing but not statistically significant number. That should mute any dramatic move in interest rates.

Why is that good? Because there is near-unanimous agreement that the one factor that will force stocks into a correction is a sudden surge in rates. Modest moves up over time, with a slowly improving economy, is different. But if the 10-year yield goes from 2.6 percent to, say, 3.5 percent in a month, forget it—that spells correction.

More importantly, the factor that really matters, wage growth, is up only 2.0 year-over-year. That is below expectations of a 2.2 percent gain; separately, last month was revised down to 1.9 percent from 2.0 percent last month.

The bottom line is there are no wage pressures.That should mute, at least temporarily, any upward pressure on yields.

»Read more
  Thursday, 31 Jul 2014 | 4:32 PM ET

Ugly day for the stock market; strange day, too

Posted By: Bob Pisani
Traders work the floor of the New York Stock Exchange.
Jin Lee | Bloomberg | Getty Images
Traders work the floor of the New York Stock Exchange.

Man, what an ugly day. But also a strange day.

There were lots of obvious catalysts: Portugal. Ukraine. Argentina. Employment Cost Index (ECI) strong. Several companies (Adidas, Beazer Homes, Ryland Group and Roadrunner Transportation) with disappointing earnings.

And yet, it's strange. The S&P 500 was down two percent, but Treasuries were relatively flat, after a see-saw day. It is strange.

First, you can't say it's all about selling in small-cap names, since the big-cap S&P 500 is down about as much as the small-cap Russell 2000.

If this was about global flight to safety...if it was about everyone fleeing the turmoil abroad and coming to the U.S….bond yields should be much lower...but they're not.

That's what makes me think this is more about growth fears...digesting the strong GDP yesterday, the strong ECI today. Fears of a sudden spike in interest rates killing the rally.

Still, it is ugly. S&P goes negative for the month on the last day. 10-to-one declining to advancing stocks at the NYSE.

What would confirm the market was focused on growth issues? If we had a very strong jobs report tomorrow. Consensus is at 230,000...well above consensus would be anything north of, say, 250,000. And no downward revision of 288,000. And remember, the ADP was below expectations earlier this week.

That would almost certainly spike interest rates. Then we'll see how stocks handle TWO above-expectation reports.

»Read more
  Thursday, 31 Jul 2014 | 9:53 AM ET

Why are markets down? Let us count the ways

Posted By: Bob Pisani

Stocks are sharply lower, with European stocks trading ugly right from the start. Germany is down more than one percent, and is lodged at the lowest levels in nearly three months.

Several factors are moving our markets, including:

1) The rhetoric in Ukraine is getting downright vitriolic. The Ukraine Prime Minister, Arseniy Yatsenyuk, said Russia was seeking to "revise the outcomes" of World War II by seizing the Crimean peninsula and fomenting war.

Read MoreWhite House: US, Europe to issue new sanctions on Russia this week

We are also seeing some global companies like BP talking about long-term impact from the Ukraine crisis.

»Read more
  Wednesday, 30 Jul 2014 | 12:04 PM ET

Stock market loses early gains... What's up?

Posted By: Bob Pisani

Stocks start up then move down. Why, you ask?

It's a disappointing day so far...the S&P 500 rocketed up almost eight points at the open, but within a half hour began a slow but steady decent into negative territory. What happened?

First: On the strong Q2 GDP, up 4.0 percent, there were detractors the minute the report came out.

Read MoreSurging US growth pushes fledgling IPOs into the backseat

A lot of inventory building, some complained. But most felt the numbers didn't change their outlook for the second half dramatically. Barclays is a good example: "We do not view the outperformance in this report as a signal that the outlook for growth has improved," they said.

Second: There's the inflation-fearing camp. Modest growth or not, many fear that interest rates could move dramatically on any sign the economy is putting together a consistent series of above-expectation economic stats.

Treasury yields are up this morning, and many are wondering if the Fed will make some comment about the possibility of a rate increase sooner than expectations (mid-to-late- 2015).

I'm not in that camp, but some are: Interest-rate sensitive stocks like Utilities, Telecom, Housing are all underperforming the market.

»Read more
  Wednesday, 30 Jul 2014 | 10:04 AM ET

US growth data steal spotlight from IPO blitz

Posted By: Bob Pisani

The U.S. economy expanded by 4 percent in the second quarter? Whoa!

That balances the anemic first quarter gross domestic product (GDP) of 2.1 percent. So what are we left with for the second half of the year? Roughly 2.5 percent growth, or perhaps a bit higher? That would average perhaps 2 percent growth for the entire year.

The problem for traders is that we are back to a choppy market. You get a down day like yesterday and an up day, and you can't stay hedged. Investors are looking for trends: for example, you're looking for 5 down days in a row. That's how you make a lot of money...when you get zigzag pattern, it eats your hedges away and the value drops materially.

Stocks go up, but your hedge gets much less valuable. The bottom line: you can't stay heavily hedged.

Still, big GDP numbers on a Federal Reserve decision day! The market needs to hold its early gains.

»Read more
  Tuesday, 29 Jul 2014 | 1:47 PM ET

Here's what today's earnings misses mean

Posted By: Bob Pisani
Getty Images

Earnings and revenue misses: Is this the start of a trend? It was not a great morning for earnings.

Consider: New York Times (NYT) missed as ad revenues dropped; UPS (UPS) missed on earnings and lowered 2014 guidance; Eaton (ETN) missed and lowered the high end of its 2014 guidance; Corning (GLW) missed; and Eastman Chemical (EMN) missed on revenues.

All are trading down notably mid-afternoon.

Is this the start of a trend? I don't think so. True, there have been a few other high-profile misses, notably Whirlpool (WHR), Amazon (AMZN), Mattell (MAT), and DR Horton (DHI), but they are outliers.

With 262 companies reporting (52 percent of the S&P 500), 68 percent of those reporting are beating expectations (above the long-term average of 64 percent), and both earnings and revenues have been improving since the beginning of the quarter:

  • Earnings: +8.4%
  • Revenues: +4.9%

Source: S&P Capital IQ

8.4 percent earnings growth is the highest since Q3 2011!

What matters most to the stock market, however, is not reported earnings, it's guidance. And it's been better! 55 companies in the S&P 500 have provided guidance for Q3: 29 are negative, 14 positive and 12 in line. That is a ratio of 2-to-1 negative-to-positive announcements, a significant improvement of the Q2 guidance of 8-to-1 negative-to-positive announcements.

»Read more
  Tuesday, 29 Jul 2014 | 9:39 AM ET

European bond bulls run wild as yields plunge

Posted By: Bob Pisani

Don't look now, but European bond investors are sending yields to lows unseen in at least 200 years. Yes, you read that right. Spanish 10 year debt now yields about 2.45 percent. That is below U.S. 10-year Treasury rates, which is at 2.46 percent.

That's right: the price of Spanish bonds are now more expensive than their U.S. counterparts.

»Read more
  Monday, 28 Jul 2014 | 10:21 AM ET

China and big mergers help brighten up a down day

Posted By: Bob Pisani
John Phillips | CNBC

The dragon is roaring again! China's Shanghai Index rallied another 2.4 percent overnight; the market is in the midst of a 4-day upswing that has seen the index rise 6 percent to close at the highest levels this year.

Chinese economic data have been improving recently, fueling the rally and spilling over into Hong Kong's market. The Hang Seng is now at the highest level since 2011.

»Read more
  Monday, 28 Jul 2014 | 7:10 AM ET

DC roundtable to feature Who's Who of Wall Street

Posted By: Bob Pisani
Getty Images

Rep. Scott Garrett, chairman of the Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises (which oversees the SEC), is holding a roundtable Monday in Washington on what, if anything, should be done about the way stocks are traded in this country.

I know, you've heard this before. In the wake of Michael Lewis' book "Flash Boys", there have been several hearings in Washington. This one is a little different, though. Here's why:

1) The 19 people attending are the cream of Wall Street's trading community. The heads of all the exchanges will be there, including many of the biggest market makers/brokers and key industry representatives. Everyone who knows anything about market structure will be part of the parade. You will probably never get all these people in the same room again.

2) The man putting on the event, Garrett, R-N.J., is well-regarded by the Street as a thoughtful lawmaker. What does he want to accomplish? He says his goal is to "produce more efficient markets, less investor confusion, better competition, and increased job creation."

Fair enough. Last year he held a similarly well-attended roundtable from academics; this time he wants the Wall Street community to weigh in. What he seeks is to forge a consensus on what, if anything, should be done. So what should we expect (or not expect)?

»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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