Analyst Rich Ross has been getting bearish lately, calling to sell semis and spotting disturbing trends in asset classes. » Read More
Friday is set to be the year's heaviest volume day as the Russell indexes get rebalanced, meaning some stocks will be added and others demoted. » Read More
Stocks in China take a hit after regulators tighten their grip on buying activity and video services. » Read More
It's been exactly one year since OPEC announced it was not cutting production. So far, they have stuck to their word.
So there is a bit of nervousness going into Friday's OPEC meeting in Vienna.
Why? Because U.S. supply declines have been modest so far this year, and no one else in the world is cutting production.
Oil is again hovering just above the psychologically important $40 level.
Problem is, no one seems to think anything is going to come out of this meeting. The Saudis are still calling the shots—the betting is they will stick to their position of maintaining market share. No cuts.
Not only are they not cutting, they're overproducing. OPEC has a quote of 30 million barrels a day, about a third of world supply. But the group announced its output last month was 32.12 million barrels a day.
In other words, there is a market share battle going on within OPEC itself. That's putting a lot of pressure on the supply/demand balance.
Then there's Iran. They will start to come online soon, possibly January. How much? It's not clear, but even if it's just 500,000-1,000,000 barrels a day, that would add roughly one percent to world supply.
In a world awash in oil, one percent more is a lot.
And demand? On average, global demand has grown roughly one million barrels a day each year for the last several years. Oh sure, there's all sorts of rosy projections for 2016. We'll see.
My point: there is lots of additional marginal supply to swamp the normal demand. And we haven't even mentioned U.S. shale, which could easily capture the incremental demand.
Analysts, which have eaten crow all year about when to "buy the bottom," keep trying to pick that bottom (that's what they do). So Cannacord Genuity said this morning: "[W]e see more upside potential than downside risk in the current global oil market and think Canadian E&P stocks provide excellent exposure to a recovering oil price."
Guggenheim went even further. They upgraded the who oil services sector yesterday, arguing that a year from now, inventories will move from builds to draws because non-OPEC production (read: U.S. shale) will drop dramatically and oil prices will recover.
This is what the bullish crowd have been arguing all year: the frackers are going to collapse. Evercore ISI summarized it: "We continue to believe that approximately a third of the companies with commoditized service offerings will end in bankruptcy as a result of this downturn..."
And boy, now is the time to buy, the bulls argue: "We believe investors are beginning to look ahead to the upturn (which we envision in 2H16) and fund flows into energy may have begun - or will soon begin."
Stop me if you've heard this before. OK, I'll stop.
Everyone knows December is one of the strongest months for stocks. In the last 25 years, the S&P 500 has been up 80 percent of the time in December, for an average gain of 1.78 percent, according to our partners at Kensho.
Since 1950, December is the best month for the S&P 500, up an average 1.7 percent, according to the Stock Trader's Almanac.
What's less commonly known is the sector performance is a bit uneven.
According to Kensho, the best performing sector in December for the last 25 years has been industrials, up 84 percent of the time for an average gain of 2.93 percent. Surprisingly, the utilities sector was the second biggest gainer, up 2.74 percent.
While the numbers are still coming in for early Christmas sales, a couple observations can already be made.
1) Sales are fair but will likely pick up. ShopperTrak estimated brick-and-mortar sales on Thanksgiving and Black Friday were down to $12.1 billion from $12.29 billion last year.
However, even though the National Retail Federation (NRF) changed its methodology, making comparisons with previous years difficult, it is maintaining its estimate that retail sales will be up 3.7 percent this year. That is not terrible in an economy with 2 percent GDP growth.
2) Online sales continue to increase. Adobe reported that online sales from Thursday through Saturday increased 19 percent to $6.1 billion.
Separately, in a widely quoted statement, the NRF reported that the number of shoppers online (103 million) exceeded the number shopping in the stores (102 million).
3) Black Friday was really Black November. There were deals all over throughout the month, especially the week of Thanksgiving.
4) There were pockets of strength in brick and mortar. RetailMetrics reported strong traffic at JC Penney, Bath and Body Works, and Victoria's Secret. Macy's said it had 15,000 shoppers waiting in line at its flagship Herald Square Store in Manhattan, similar to last year.
Chinese stocks are about to become a bigger part of the global investor's portfolio. And there is more coming.
China is a huge part of the global economy, but a good part of China's stock market is not represented on any of the global indices. Starting Dec. 1, MSCI, one of the leading index providers in the world, will include all 14 U.S.-listed China stocks in its indices, including Alibaba and Baidu.
Believe it or not, these big Chinese companies like Alibaba, the biggest e-commerce retailer by far, and competitor Baidu, have not been represented in global indices.
That's going to change.
This morning, on CNBC...
CNBC's Carl Quintanilla: "Ramifications for unicorns?"
Square CEO Jack Dorsey: "I don't know."
Quintanilla: "You'll admit that you're a test, yes?"
Dorsey: "I don't know; I am not an economist. We have an economist on our board, Larry Summers, you should ask him."
Square's CEO did not want to answer my colleague's question about whether Square was a canary in the coal mine for all those "unicorns" like Snapchat, Dropbox, Pinterest, Airbnb and even Uber that may be preparing to go public in 2016.
But I'll answer the question: hell, yes!
The midpoint of the price talk for Square was $12. It priced at $9, a 25 percent discount.
If it would have opened at $8, you would have heard bodies dropping and cranes halted all across Silicon Valley. Valuations have already been cut and would have had to be slashed even more for future IPO candidates.
But it didn't. It opened at $11.20, briefly went over $14, and midday has settled between $12 and $13, up roughly 40 percent.
Talk about a sigh of relief.
So, now the inevitable question whenever there is an IPO pop: did they price it too low?
No. Pricing IPOs is an art, not a science.
In the case of Square, there were three big problems.
First, it doesn't make money, yet. No one is sure what the future earnings are going to be like. It needed an extra discount to address that uncertainty.
Second, the entire IPO market has been pressured by investors to lower prices. Square was not an exception.
Third, the bookrunners likely faced additional pressure because it was a bellweather for other unicorns. Every IPO is under pressure to launch, to go public. Square faced that pressure, but in addition, the bookrunners likely felt it was important to get some kind of pop, because if they didn't get one at the open — if it would have opened at $9, for example, right where it was priced — it's possible the stock could have quickly sold off. It then would have been a broken IPO, and the repercussions would have been enormous.
Remember, the hard part is done: going public. If they need to raise more money, they will sell more stock.
Finally, while this is good news for IPO investors, one day does not an IPO success make. Remember, Twitter closed its first day up 72%, and has since broken its IPO price many times.
Payment provider Square priced 27 million shares at $9, below the price talk of $11 to $13.
Square is far and away the more important IPO today because it is being watched as a leading indicator for other "unicorns," tech companies with heavy rounds of private fundraising that are now seeking to go public.
The company raised $243 million, 25 percent less than what they had aimed for. It had been valued at $6 billion in private financing last year, but is now worth half that: $2.9 billion.
The NYSE has become the latest exchange to announce plans to no longer accept stop orders and good-till-canceled orders, beginning Feb. 26.
A stop order is an order to buy or sell a stock when it passes a certain price. It then becomes a market order, but it may or may not execute at exactly the stop price.
If the order is "good till canceled" it remains open until an investor cancels it or a trade is executed.
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.
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.
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.
Still, the phrase — "This time is different" — was widely cited over the weekend. How is it different?
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?