Trader Talk

And so it begins: market fires starting pistol on IPO surge

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A boomlet of initial public offerings begins today, starting with a well-known Chinese brand.

Xunlei Limited (XNET), one of the largest internet companies in China, priced its IPO last night—one day early (it was expected to price tonight). The company priced 7.3 million shares at $12, well above the price talk of $9–$11, on the NASDAQ. Xunlei claims it has over 300 million unique visitors each month visit its cite to access music, video and games.


1) The market is setting up for quarterly re-balancing Friday. The end of the week will see Quadruple Witching, the quarterly expiration of stock and index futures, and stock and index options. However, Friday is also the yearly re-balancing of the Russell indexes.

Most important is the re-jiggering of the Russell 1000 (large cap) and the (small cap) indices. The most striking development so far this year has been the notable outperformance of value stocks over growth names:

Russell 1000 Value up 8.0 percent

Russell 1000 Growth up 5.4 percent

Russell 2000 Value up 3.0 percent

Russell 2000 Growth up 1.5 percent

The Russell 1000 Growth Index includes well-known tech names like Apple, Microsoft and Google (GOOGL and GOOG), but also social media names like Twitter that were hurt badly by jittery investors, as well as retail names that have had a disastrous year like Coach--down 39 percent, Best Buy down 28 percent, Bed Bath & Beyond down 24 percent, and Dick's Sporting Goods down 23 percent.

The Russell 1000 Value Index contains many energy companies, principally ExxonMobil and Chevron, but the smaller names in that group have taken off.

Newfield Exploration is up 77 percent, Nabors Industries has risen 65 percent, Anadarko Petroleum has gained 40 percent. It also inclludes airlines like Delta and Southwest Airlines, both up about 40 percent this year, and many financial names like Berkshire Hathaway and JPMorgan Chase.

Ron Bundy, the head of indexing for Russell, will ring the opening bell at the NYSE and chat on Squawk on the Street this morning.

2) Walgreen reported earnings and revenues below expectations. While the company noted that third quarter same store sales had increased a respectable 4.8 percent and that prescriptions filled had increased, they also cited increased pressure on pharmacy gross profit margins. In other words, they might be filling more prescriptions, but they're making less money on them.

3) Carnival reported a strong second quarter beat of 10 cents. It cited a gradually improving economic environment, improvement in fuel consumption, and (gasp!) higher prices. The company raised 2014 share estimates, though third quarter numbers were below expectations.

--By CNBC's Bob Pisani