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Market Insider with Patti Domm Trader Talk with Bob Pisani


  Monday, 16 Nov 2015 | 4:04 PM ET

Why market reaction to Paris attacks have been muted

Posted By: Bob Pisani
A trader works on the floor of the New York Stock Exchange.
Getty Images
A trader works on the floor of the New York Stock Exchange.

It's been a surprisingly quiet trading day. After opening down 1 percent, all the European bourses recovered, with most ending in positive territory.

U.S. stocks were split at the open, with defensive names like utilities and telecom and consumer staples leading, but as oil rallied mid-morning the entire market lifted, with energy stocks taking the lead.

The CBOE Volatility Index is experiencing one of its biggest declines in a month, down about 9 percent.

I've been asked repeatedly why the markets were so quiet in light of the attack. There are several likely reasons the market did not go into panic mode:

1) Stocks were very oversold. Global markets had a terrible week, with much of Europe and the U.S. down about 3 percent, with particularly large declines in energy and retail stocks.

This morning, when the European markets opened down 1 percent but then immediately began recovering, it likely forced some participants who were short going into the weekend to cover their positions.

2) The economic impact of terrorist attacks is more muted than many expect. Prior attacks indicate that consumption is usually "postponed" rather than abandoned, so the long-term economic impact has been small.

3) The ECB is likely to be even more accommodative. Indeed, the day before the Paris attacks, ECB head Mario Draghi hinted that he may continue to buy bonds beyond autumn of 2016, when the current $1.1 trillion euro QE program is slated to end. He also said he could up the number of bond purchases per month and expand the list of bonds the ECB could buy.

4) The final possible contributor to today's muted market reaction makes me uncomfortable to even acknowledge, but it is on the minds of a good part of the trading community today: as the frequency of terrorist attacks has increased, the emotional impact is diminishing as well. We are just getting inured to these events. Look how fast even Paris is trying to get back to normal, re-opening the Eiffel Tower.

Regardless: a good argument could be made that this event is different. This is not a one-off event, this is the third event in a short period of time (following on the downing of the Russian airliner in Egypt, and the bombing of Hezollah neighborhoods in Lebanon), all claimed by ISIS.

»Read more
  Monday, 16 Nov 2015 | 10:16 AM ET

Market reaction to Paris attacks is modest

Posted By: Bob Pisani

The market's reaction to the Paris attacks have been modest, even at the open, which surprised many observers.

The pattern in the past from these events is that the market sees a short selloff. We saw this with the Russian plane that was downed and following the assault on the offices of satirical magazine Charlie Hebdo.

But then things go back to normal.

France's CAC-40, the broadest measure of the French market, gapped down one percent at the open but mid-session is down about half that. The same goes for Germany, which is down only 0.2 percent.

Read More Paris attacks unlikely to cause correction: Wilbur Ross

Luxury stocks like Hermes and LVMH are down only 1 to 2 percent. These were the subject of great speculation over the weekend because they depend partly on Asian tourists coming to Europe. CNBC's Eunice Yoon in Asia said travel agencies in the big Chinese cities have been reporting massive cancellations — in the 50 percent range — of trips to Europe for November and December since the weekend.

Airline stocks like Air France and Aeroports de Paris (which runs the Paris airports) are down 4 to 7 percent, but German rival Lufthansa is down only two percent.

Still, the phrase — "This time is different" — was widely cited over the weekend. How is it different?

»Read more
  Friday, 13 Nov 2015 | 3:22 PM ET

Pisani: Retail's problem isn't tightfisted shoppers

Posted By: Bob Pisani

New 52-week lows popped up everywhere in retailers today, from department stores like Nordstrom, Kohl's and Macy's to the discounters like Wal-Mart and Dollar General to apparel chains like Urban Outfitters and Gap.

Retailers are getting clobbered today, but don't miss the key story: consumers are buying, they're just not buying at department stores and some apparel places.

This was glaringly obvious in the October retail sales report. Sales were up 1.7%, year-over-year. But there was a wide difference in where people put their money:

October retail sales (YOY)
Online up 7.1%
Auto dealers up 6.7%
Restaurants/bars up 5.5%
Furniture up 5.2%
Health/personal care up 4.6%
Building materials up 4.3%
Department stores up 0.5%

So, people are shopping more online. They're buying more cars. They're drinking and eating out more. They're buying furniture. They're buying makeup and beauty products (look at Ulta Salon, up 22% this year). They're buying stuff at Home Depot and Lowe's to improve their homes.

And department stores? Up 0.5%. Nothing.

One problem is that some of the hottest retailers — fast fashion — are not represented in the U.S. stock market. Forever 21 is private. Zara, part of Inditex, trades in Europe. Uniqlo trades in Tokyo. And the hottest fast fashion store of all — Primark — is only open in Boston and Philadelphia, with many more coming next year. Their parent, Associated British Foods, trades in London.

How bad is retail? The Street is essentially throwing in the towel on the department stores.

Look at JC Penney. By any standard, its earnings report was good: A smaller loss than expected, and it is regaining market share.

And its reward? Down 15 percent on titanic volume. I'm talking eight times normal volume.

THAT is throwing in the towel.

Why throw in the towel on a good report? Because no one cares. No one believes the department store story any more. The whole paradigm is breaking down. They've had no profits since the fourth quarter of 2011, maybe they will this quarter, maybe not, but who cares?

»Read more
  Friday, 13 Nov 2015 | 10:03 AM ET

IPO market is fizzling. Why that's good news

Posted By: Bob Pisani
An Albertson's location in Laguna Niguel, California
Scott Mlyn | CNBC
An Albertson's location in Laguna Niguel, California

The initial public offering market is fizzling as 2015 comes to a close. LoanDepot became the latest company to pull its IPO, citing the dreaded "market conditions."

There is nothing wrong with the consumer loan business LoanDepot represents, but there was some debate about its valuation. The company is essentially a mortgage lender, but it trades at multiples closer to peer-to-peer lending platforms. Why was LoanDepot?

But don't kid yourself. LoanDepot was a victim of the fragile market and an IPO after-market that has lost investors money for most of this year.

And now those IPO investors are demanding lower prices to buy. LoanDepot was hoping to float 30 million shares at $16 to $18, but talk on desks yesterday was it could price at $12 and lower.

Rather than take the price, management walked.

And others have, too. Albertsons dropped its IPO, and it's unlikely Nieman Marcus or Univision — two high-profile names that have filed but not announced terms — will debut now.

»Read more
  Wednesday, 11 Nov 2015 | 1:34 PM ET

Pisani: Why luxury names fall when Macy's warns

Posted By: Bob Pisani
Pedestrians walking in front of Macy's in New York.
Scott Mlyn | CNBC
Pedestrians walking in front of Macy's in New York.

It's understandable that Macy's stock is getting hit hard, down roughly 13 percent on its poor guidance, but a lot of traders are scratching their heads over the big declines in luxury names: Kate Spade, Ralph Lauren, Fossil, Michael Kors, and Coach all down 4 to 5 percent.

The simple answer is, they all sell to Macy's and other big-box retailers, and Macy's isn't the only problem.

Macy's keeps its margins up by pushing back on the vendors they buy from—they say, "We can't sell your stuff, we want a discount on the stuff we bought from you." And that's what happens: the vendors have to take a hit on the money they are going to get.

There's a double whammy: not only does Macy's get a discount on the stuff they already have, they also adjust future orders lower.

The key numbers to look at for Macy's is the spread between inventories and sales. It's getting wider, and that's not good.

It was good a year ago, but it's been deteriorating since then:
Q4 2014: Inventory down 1%, Sales up 2% (good!)
Q1: Inventory up 2.7% Sales down 0.7% (bad)
Q2: Inventory up 3.8% Sales down 2.6% (getting worse!)
Q3: Inventory up 4.6% Sales down 5% (yikes! panic!)

So now we hit Q4, and guess what's going to happen? Macy's has a huge pile of inventory it has to clear.

That's why CEO Terry Lundgren came on CNBC Wednesday morning and said, "Consumers are going to have a field day," because of the markdowns they will have to take.

And they are not alone. We may get equally bad news from Kohl's, reporting tomorrow. Sales have been sluggish as well, and inventories are also rising. They have other issues: they are losing share to JC Penney, they have no strong internet presence, and not much in the way of aspirational brands.

We all know, of course, that the consumer is not completely falling apart. They are buying stuff, they are just not buying Macy's stuff, or other retailers. They're buying homes, cars, travel and experiences (theme parks, plays, movies, sporting events), and electronic goods.

And much of what they are buying, they are buying online. Two years ago, David Berman of Durban Capital introduced the concept of "SAA" (Samsung, Apple and Amazon), that consumers are spending on devices and using those devices to buy rather than go to the mall.

It's a concept that has clearly caught on. He was on our air yesterday and noted that inventories were indeed building at traditional retailers and that internet shopping was accelerating. He noted that traditional retail sales were up about 3.1 percent in Q3, while sales of Samsung, Apple, and Amazon were up 20.8%, with total sales up about 5.2 percent. In other words, much of the incremental growth is coming from online.

"There is a complete structural change in retail," Berman noted. Another point: because people are spending less time in malls, there is less impulse buying, which was a major help to retailers.

It's not all bad news. Fast retailers like H&M, Zara's, and Forever 21 are taking market share away from the old-school retailers.

Still, Berman was not optimistic on most of the names he covers: "Earnings are going to come down more than people expect."

»Read more
  Monday, 9 Nov 2015 | 12:57 PM ET

Here's the factors behind today's decline

Posted By: Bob Pisani
Traders work on the floor of the New York Stock Exchange.
Getty Images
Traders work on the floor of the New York Stock Exchange.

Stocks are experiencing their weakest day in over a month, with 6 stocks declining for every 1 advancing. The CBOE Volatility Index, up 15 to 16 percent and change, is experiencing its first double-digit gain since the end of September.

Several factors have come into play:

1) Much of the decline is attributable to continuing fallout from the strong jobs report and the increasing likelihood the Fed will raise rates in December. Interest rate sensitive groups like REITs, emerging markets and home construction are down roughly 2 percent, though utilities which were hit hard last week, are down only fractionally.

The head of the San Francisco Fed, John Williams, said over the weekend there were good reasons for the Fed to begin raising rates, though he said the data would dictate "when."

2) Stocks are relatively expensive after a six-week rally. Forward P/Es are relatively high: at current estimates of $118.62 for earnings for the S&P 500, the full-year P/E is 17.5, well above the 10-year average of 14.2, according to Factset.

For the fourth quarter, earnings expectations are also declining at a rate greater than Q3.

3) Commodity prices—particularly oil and copper—are continuing to indicate oversupply and slower global growth. Copper remains near the lowest level since 2009; oil is near the bottom of its 2-month range. Speaking of slower growth, overnight China reported that exports in October fell for the fourth consecutive month.

4) Department stores are notably weak, with many off 4 to 5 percent. They will all begin reporting this week: Macy's Wednesday, Kohl's and Nordstrom Thursday, and JC Penney Friday. Earnings estimates are coming down for the group. Citigroup lowered forecasts for Macy's and Kohl's Monday.

»Read more
  Friday, 6 Nov 2015 | 3:28 PM ET

Why markets aren't rocking on the big jobs number

Posted By: Bob Pisani
A trader works on the floor of the New York Stock Exchange.
Getty Images
A trader works on the floor of the New York Stock Exchange.

Where's the action? Traders on the NYSE floor—and those on sell-side desks around the city—are disappointed at the market's reaction.

The biggest jobs report surprise in years, by their reckoning, should have resulted in titanic volume—and a big pop in volatility.

Not happening. Volumes are borderline heavy, but not overwhelmingly so. The CBOE Volatility Index—the simplest measure of market volatility, is down midday, below 15.

It's not all quiet. There is considerable churn in Utilities and other interest rate sensitive sectors like Emerging Markets and REITs.

And banks are all up 2%-4% on heavier volume.

Still, given that many were still in the "Fed will not hike this year" camp, there is some surprise there is not more money moving around.

Traders I've spoken with explain this by offering two explanations:

1) long-term investors don't act like macro hedge fund guys and shift their portfolio on a dime. Investment committees—the ones who run the pension funds and the mutual funds--do not make snap decisions on asset re-allocation in the course of a morning. Many will be meeting over the following days--and weeks--to decide if they need to make changes.

But even then, a surprising number are arguing that many will simply decide on a stay-the-course-with-equities approach:

2) The Fed is trying to project a sense of optimism about the economy from the Fed, and what's wrong with optimism about the economy?

The Fed is not changing much; global rates are going to remain low for a long time, particularly in Japan and Europe.

In the context of still-low rates today and in the near future, this is still an investable climate because a modest economic expansion is ongoing. Stock multiples-—lightly on the high side right now—should not be threatened by the Fed hiking rates. Capital flows are still moving into the U.S.

Oh sure, there could be a period of stress and turbulence when the hike occurs, but this has been so well telegraphed it's hard to envisage it would last very long.

Mostly, though, it's good to shift the focus away from liquidity and towards earnings and growth.

And that's the key point: growth continues, and there is no sign of recession. That is the ultimate killer.

Labor force growth, with GDP growth of 2% is good enough to keep the jobless rate moving down.

Most importantly, the key missing ingredient—wage growth—may be starting to move as well. Average hourly earnings up 0.4% month-over-month, 2.5% year-over-year. Don Strazheim at ISI noted this morning that once average hourly earnings start to accelerate, they typically go from 2% to 4% in roughly three years.

These numbers should at least give the FOMC some hope that their 2% inflation growth target may happen sooner rather than some time in the distant future.

Get it? That's the argument for the stay-the-course-in-stocks crowd. Oh sure, you can play around the edges—buy some more banks, sell some utilities, stay away from commodity names, but the central argument—keep owning the S&P 500—isn't changing.

It's certainly a plausible explanation for why the world isn't moving on the jobs number.

Still it's hard to believe there won't be some turbulence. One serious headwind for stocks: the continuing strength of the dollar, which is a major problem for foreign company earnings. There had been hope over the summer that the dollar strength was moderating, but that has not panned out.

The dollar index today is at its highest level since April.

This will continue to put pressure on commodities like copper and oil, and the earnings of companies in those businesses.

»Read more
  Friday, 6 Nov 2015 | 10:27 AM ET

Pisani: Jobs report will shake out stock sectors

Posted By: Bob Pisani

The stunningly strong October jobs report — up 271,000 for the biggest 12-month gains since July 2009 — has many investors high-fiving. But others are surely scrambling to revise their bets.

Read More BOOM! Nonfarm payrolls up 271,000; jobs rate at 5%

The world was divided into two camps: those who believed a hike in December was coming and those who didn't.

Those who did listened to Fed officials' rhetoric — that they really wanted to raise rates — and made bets in that direction. There were several macro bets and stock sector bets.

Macro trend bets

  • Long: dollar, developed markets
  • Short: commodities, emerging markets

Stock sector bets

  • Short: energy, materials, industrials
  • Long: health care, consumer discretionary, financials

Here's one reason we had such an strong (and interesting) rally in October. Because some of the data was weak, the camp that believed there was no chance the Fed was going to raise in December gained traction.

»Read more
  Thursday, 5 Nov 2015 | 9:54 AM ET

Oil companies are learning to do more with less

Posted By: Bob Pisani

The first wave of mid-sized oil and gas exploration and production companies has reported, and the results are more encouraging than many had anticipated. Production levels remain relatively high — in most cases at or near year-ago levels — yet capital expenditures are way down.

This means companies are employing new technologies and learning to produce more with less. Capital efficiency is increasing dramatically.

Read More Frackers change methods in 'imploding' oil market

Look at Marathon Oil, out last night after the bell. The loss of 20 cents was far less than the 40-cents expected loss. Sales volumes were higher than expected. Production expenses came in lower than expected. Capital expenditures for 2015 are being cut more than estimated, and projected capital expenditures for 2016 are also being slashed further.

Devon Energy also reported a sizable earnings beat (76 cents vs. 52 cents consensus), with production higher than expected, and spending lower than expected. For 2016, it looks like capital expenditures will be much lower, with production increasing in the low single-digits.

You see? Production steady, but spending much lower. Earnings somewhat better than expected. Doing more with less!

»Read more
  Wednesday, 4 Nov 2015 | 6:03 PM ET

Case makes history with 'spoofing' conviction

Posted By: Bob Pisani

A New Jersey trader became the first person to be convicted on a charge of "spoofing," flooding the market with orders he did not intend to execute.

Though the conviction involved attempts to manipulate the commodities futures market, the ruling has implication for stock trading as the case provided a guideline to the somewhat nebulous concept of "spoofing."

Spoofing was made illegal by the 2010 Dodd-Frank Act.

»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.


  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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