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Market Insider with Patti Domm Trader Talk with Bob Pisani

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  Thursday, 5 Nov 2015 | 9:54 AM ET

Oil companies are learning to do more with less

Posted ByBob 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 ByBob 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
  Tuesday, 3 Nov 2015 | 10:32 AM ET

Stocks overbought; traders await central banks

Posted ByBob Pisani
European Central Bank President Mario Draghi.
Emmanuel Dunand | AFP | Getty Images
European Central Bank President Mario Draghi.

The good news is that stocks are on a real win streak. And it's a broad win streak, with previous laggards like the Russell 2000 also showing strength.

The bad news is that we have moved very far, very fast, and many sectors and indices are now in classic overbought territory, including the NASDAQ 100, the S&P 500, and even Germany.

Of course, markets can — and do — remain overbought for a long time.

Read More Why stock bull Tom Lee still sees double-digit year

If you believe — as many do — that the bulk of the rally is due to expectations that the Bank of Japan (BOJ) and the European Central Bank (ECB) will continue and even add to their quantitative easing programs, and that the Fed is on hold, pay attention to next two days, because all the Fed officials are speaking, though they may not directly address the issues of most concern to investors.

Central Bankers speaking:

  • Today: ECB President Mario Draghi speaking at 1 p.m. EDT
  • Wednesday: Fed Chair Janet Yellen, Fed Vice Chair Stanley Fischer, and New York Fed President William Dudley
  • Friday: BOJ Governor Haruhiko Kuroda

If the Fed is going to begin tightening in December, you would at least expect Fischer and Dudley to begin laying the groundwork now.

Decidedly not oversold are commodity companies, which are having a simply horrific year.

Read MoreGoldman Sachs: What to expect from commodities as China slows

Commodity companies YTD:

Alcoa is having its analyst meeting today. The top issue is the pending split up of the company into an upstream division that engages in alumina production and smelting, and the faster-growing value-added division that makes aluminum for the aerospace and vehicle industries, including the aluminum Ford F-150.

But there's no getting away from the continuing overcapacity and decline in aluminum prices. Last night Alcoa said it would idle three of its four active U.S. aluminum smelters. That is a radical move, the steepest cuts yet by an aluminum producer and a sign of how bad things have become.

»Read more
  Monday, 2 Nov 2015 | 11:05 AM ET

Precious time left for lots of IPOs this year

Posted ByBob Pisani

This is another slow week for IPOs — only five are scheduled, none of any size — and that has a few in the business a little nervous.

The IPO market for 2015 is closing fast. There are only a few weeks left in the year. Nothing will get done Thanksgiving week or the second half of December.

That leaves roughly four weeks for a lot of waiting IPOs to get through the door.

Read MoreHere's why Ferrari's IPO has nothing to do with the IPO market

We are well below the average number of IPOs and the amount raised compared to the last several years.

But the number of companies looking to go public has not slowed down. This means a lot of companies are hoping to get through the doors in the next few weeks.

Tops on the list: Match.com with a potentially $700 million offering, Square at $275 million, Ballast Point Brewery at $173 million, and cybersecurity firm Mimecast at $100 million.

»Read more
  Thursday, 29 Oct 2015 | 8:45 AM ET

Mom and pop crowdfunding about to become a reality

Posted ByBob Pisani
The Securities and Exchange Commission in Washington
Jim Bourg | Reuters
The Securities and Exchange Commission in Washington

Mom and pop crowdfunding for startups is about to become a reality.

That's good news, but it also comes with a lot of red flags.

On Friday, the Securities and Exchange Commission is expected to issue a final rule regarding Title III of the JOBS Act. This will allow small companies to directly raise debt or equity capital from friends, family, and interested investors.

The SEC has taken three years to consider what they are doing, and with good reason.

Read MoreThe CNBC Crowdfinance 50 Index

In 2012, Congress passed the Jumpstart Our Business Startups Act, known as the JOBS Act. One of its provisions allows new businesses to raise capital from directly from private investors.

Any investors.

This is a radical idea. Since the 1930s, only "accredited" investors — those with $1 million in net worth or who earn at least $200,000 per year — were allowed to invest in startups.

In other words, only rich people could get in on these private equity deals.

»Read more
  Wednesday, 28 Oct 2015 | 11:08 AM ET

The influence of the strong dollar on revenues

Posted ByBob Pisani
Trader on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters
Trader on the floor of the New York Stock Exchange.

I've been noting the "revenue recession" that corporate America has been facing for the last six months.

We are faced with the prospects of four consecutive quarters of negative revenue growth in 2015.

Companies cannot even beat the lowered revenue guidance for this quarter. With 20% of the S&P 500 reporting, 70% of the companies have beat earnings estimates, but only 38% have beat revenue estimates.

That is pathetic!

Why has this been happening? I've been pointing out the negative influence the strong dollar has had on corporate earnings for two quarters now.

There's no question that the strong dollar is hurting companies, particularly those that get more than half of their revenues overseas.

However, I've noticed a certain tendency to dismiss the disappointing revenue numbers as solely due to the influence of the strong dollar.

That, it seems to me, is an exaggeration.

Orders are definitely deteriorating for many companies, and that is due to the slower global economy, not a strong dollar.

The problem is, there is no easy way to sort this thread out, to say, for example, "The strong dollar is 60% of the reason companies have missed revenue expectations."

But you can get a clue by looking at who is beating revenue expectations, and who is not, by sector.

All the larger sectors get roughly 50% of their sales outside the U.S.

If the stronger dollar was the only issue, there should be a roughly even distribution of sectors beating--or missing—revenue expectations.

But that's not the case. Look at this:

Q3 Revenue beats

Healthcare 65%

Tech 63%

Industrials 23%

Materials 10%

Source: S&P Capital IQ

Healthcare and tech are clearly doing better, and industrials and materials are lagging noticeably.

Why are the results so lopsided? Because industrials and materials are exposed to the slower global industrial economy and are reporting lower sales. Tech and healthcare, while also exposed to the global economy, are in sectors with better growth prospects.

This is why we hear of so many companies carving out small gains on earnings but miss on revenues: just yesterday, we heard from DuPont, Cummins, Paccar, and Textron, all global materials/Industrial names that are exposed to China and Brazil. Their sales are slowing because of the slower economies.

So let's call it a draw. The dollar and the slower global economy are the two major reasons revenues are light, and let's leave it at that.

»Read more
  Tuesday, 27 Oct 2015 | 5:09 PM ET

Walgreens deal for Rite Aid deal likely to succeed

Posted ByBob Pisani
A delivery to a Walgreens location in New York City.
Scott Mlyn | CNBC
A delivery to a Walgreens location in New York City.

The Wall Street Journal report that Walgreen Boots Alliance is in talks to acquire Rite Aid makes sense, even with antitrust concerns.

This is all about cost savings. The Affordable Care Act is putting pressure on companies to lower costs. Faced with ever-higher drug prices, pharmacy benefit managers are pushing back against both the pharmaceutical companies and the retail drugstore chains. If they can't get them to lower prices, they will force their beneficiaries (that's you and me) to pay a higher portion of the costs.

If you're a Walgreens or Rite Aid or CVS, you want to get bigger so that at least no one can simply cut you out of a deal.

What about antitrust issues? Given that the three main drugstore chains control a good portion of the retail business, you would think there would be some antitrust issues, and like the Anheuser-Bush InBev and SABMiller, it seems there would be some divestiture where there is significant overlap.

But closer inspection reveals that Rite Aid is significantly smaller than its rivals:

Retail pharmacy stores
Walgreens 8,200 in 50 states
CVS 7,800 in 44 states
Rite Aid 4,600 in 31 states

Vishnu Lekraj, an analyst at Morningstar, thinks the deal would make sense, since it has a large presence in only a few regions (parts of the northeast, for example), making antitrust issues manageable.

Also, Lekraj notes that the retail drug space has seen notably increased competition, everything from Wal-Mart to Target to Kroger and even small local grocery stores, greatly diminishing the chances that antitrust alone would blow up the deal.

Richard Evans, analyst at Sector & Sovereign Research, estimates that Walgreens would only have to divest 9.9 percent of the acquired Rite Aid stores.

As for other winners and losers, pharmacy benefits manager McKesson would be a loser, since it has a relationship with Rite Aid but not Walgreens or CVS. Express Scripts also has a relationship with Rite Aid that would be hurt, but the stock is also down because they were rumored to be an acquisition target of Walgreens. AmeriSourceBergen is partly owned by Walgreens and would be a beneficiary of the deal.

»Read more
  Tuesday, 27 Oct 2015 | 10:10 AM ET

More talk of cutting costs as revenues remain weak

Posted ByBob Pisani

We are in the core of earnings season, and once again this morning's crop of earnings illustrates the very severe "revenue recession" we are experiencing.

DuPont, for example, beat on the top line but revenues were notably light.

Diesel engine maker Cummins also beat on the top line but revenues were notably light.

Truck maker Paccar also beat on the top line but revenues were notably light.

Read MoreChance of recession highest in two years: Survey

Global industrial player Textron also beat on the top line but revenues were notably light.

And specialty glass maker Corning also beat on the top line but revenues were light.

Detect a trend?

This is a problem. The S&P 500 is trading at close to 19 times forward earnings with little or no growth. When you have negative revenue growth, that means your margins are under pressure. To keep margins near the record highs we have seen in a negative growth world, you have to keep aggressively cutting costs.

»Read more
  Thursday, 22 Oct 2015 | 3:15 PM ET

Pisani: Why October has been surprisingly strong

Posted ByBob Pisani
Traders on the Floor
Andrew Burton | Getty Images

Surprise! October has been a great month for the stock market, and not just the U.S. This has been a global rally:

Global markets in October

S&P 500 up 6.9%

Germany up 8.6%

China up 10.3%

Japan up 6.0%

Once again, the Street has been surprised. What's behind the October rally?

1) Lower probability of Fed hike. This is the most important factor. The current rally began on October 2nd, the day of the disappointing September nonfarm jobs report. That is also the day the CBOE Volatility Index began its most recent slide, going from roughly 21 to below 15 today.

2) ECB, China, Japan central banks more dovish. The rally continued this morning, when Europe and U.S. futures popped on the ECB's Mario Draghi dovish commentary. Much of the China rally has been attributed to a belief that the People's Bank of China would enact more stimulus, particularly after the 6.9 percent print of third quarter GDP.

3) Revenue declines: strong dollar gets much of the blame. I've made a lot of what I call the "revenue recession" that has been developing this year. If current estimates hold up, we are facing four consecutive quarters of negative revenue growth:

Revenue recession (S&P 500)

Q1: down 2.9%

Q2: down 3.4%

Q3 (est): down 3.4%

Q4 (est) down 1.9%

Source: Factset

However, this quarter companies have become increasingly vocal about the impact the strong dollar is having on their bottom line. They are not exactly asking for a "pass," but they are asking for some understanding, and I am seeing signs that some investors are indeed listening.

This morning, for example, 3M noted that sales declined 5.2 percent year-over-year, but then noted that the strong dollar reduced sales by 7.4 percent year-on-year. In other words, the revenue decline was mostly attributable to currency.

There is some truth to this, but no one should be fooled into thinking that a strong dollar is the primary source of our revenue worries.

We are facing lower demand due to slow—and in some cases declining—global growth.

You can see this in Caterpillar's report today. They too missed on revenues. Sales were down 19 percent, but management specifically said it was due mostly due to lower volume in Latin America, Europe, and Asia, though they did note that negative currency impact was roughly 3.5 percent.

So negative currency was a significant, but not the primary factor, for Caterpillar's revenue decline.

This is an old story, of course, and at times when the dollar is weak this same phenomenon works to the advantage of revenues.


»Read more
  Thursday, 22 Oct 2015 | 9:59 AM ET

Forget Ferrari. IPO market in price-cutting frenzy

Posted ByBob Pisani

I have said all week the Ferrari IPO, which priced at the high end of the price talk, was an anomaly. The IPO market is suffering from a large number of withdrawals and postponements, and those that have priced recently are typically roughly 20 percent below the midpoint of the price talk.

That trend is continuing this morning. Two companies priced overnight, and look what happened.

Multi-Packaging Solutions (MPSX): packaging primarily for consumer and health care products

  • Price talk: 18.75 million shares at $15 to $17
  • Priced at: 16.5 million shares at $13

Dimension Therapeutics: liver disease treatments

  • Price talk: 5.5 million shares at $14 to $16
  • Priced at: $13

And earlier this week, look what happened to American Farmland, a farm REIT that owns property California, Illinois and Florida that began trading on Tuesday:

American Farmland: farmland REIT

  • Price talk: 12 million shares at $8.50 to $10.50
  • Priced at: 6 million shares at $8, opened at $7

Ouch! Not only did all three price below the range expected, but two of them lowered the amount of shares offered!

»Read more

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  • 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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