OK, Facebook Is Embarrassing
OK, this is embarrassing. Facebook at $32.70 in pre-open trading is embarrassing. Down 15 percent in two days is embarrassing on an initial public offering this big.
A lot of traders are pissed off at Morgan Stanley. Yesterday, it looked like Morgan Stanley provided some half-hearted support at $35 and $33 early in the day, then just stepped aside, letting everyone who wanted to get out, get out.
Why angry at Morgan Stanley? Because it is the one who increased the price and the size of the offering. What about Facebook , weren't they complicit? Sure, but traders aren't going to blame it. They will blame Morgan Stanley — it is the one who went to Facebook and said its book could accommodate this size. Apparently not.
What to do? Some are hopeful that Morgan Stanley will wait for the volume to drop off, then come in with more meaningful efforts at support, or at least call some friends of the court (Fidelity Investments, etc.), ask them to start buying. Pleading.
1) A bridge to nowhere? We can do that. Americans can't, but we can. Mining stocks up on China's plan to boost infrastructure investments, or at least a proposal. A Chinese newspaper is reporting that the government is looking to fast-track more infrastructure proposals. Any infrastructure proposals.
2) We can have growth! We can have austerity! We can have everything! I wrote yesterday that all sorts of proposals are being hauled to the "informal" European Union summit meeting beginning Wednesday. Like the Chinese, some are looking to fast track some infrastructure proposals using "project bonds." They want the European Investment Bank to expand investment using funds backed by Eurobonds. They want an expanded mandate for the European Central Bank as a back door to monetary pump-priming. German Chancellor Angela Merkel will be the punching bag: She will walk out of this six inches shorter if she doesn't start swinging back.
2) No mercy in retail land. On the surface, retail earnings today looked pretty good. Retail earnings reports keep rolling in, with five of six beating.
The one that didn't, Express, not only missed but provided disappointing second-quarter and full-year guidance, and has been trading down 25 percent in the pre-open.
Heavens. Down 25 percent? You would think the company was going out of business. But no: At $0.47, it missed expectations by two cents. Sales were UP 8 percent. It is reporting second-quarter same-store sales will RISE in the low mid-single digits. Gross margins down slightly, and inventories up slightly, were clearly a disappointment, but shares trading down 25 percent? Yikes.
It's not the only one getting killed: Look at watchmaker Fossil, down 45 percent since its earnings release on May 8. What was its immense sin? Fossil cut its 2012 earnings per share outlook by 10 cents to between $5.30 and $5.40 — bracketing analysts’ $5.34 expectation. Second-quarter earnings per share of $0.77 to $0.79, the low end of the Street’s $0.79 view. Yikes!
—By CNBC’s Bob Pisani
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