Market Insider Trader Talk with Bob Pisani

Oil took another tumble midday Wednesday, below $43 a barrel, and regardless of the reason we are finally starting to see analysts on the Street throw in the towel and begin to take down 2017 earnings estimates.

The problem is simple: many analysts and strategists are still forecasting average oil prices of $60 this year. It is now abundantly clear that is not going to happen.

So it's about time estimates started coming down. Today a raft of companies dropped ratings on oil companies:

1. Macquarie downgraded Chevron, Royal Dutch, Repsol, and British Petroleum;
2. Morgan Stanley downgraded Marathon Oil;
3. Seaport downgraded a pile of oilfield services stocks, including Halliburton, Baker Hughes, Nabors, Diamond Offshore, and Rowan, along with many exploration & production names like Concho, Devon, Apache, and Marathon Oil.

The big issue is, when will supply come in line with demand? More specifically, when will the U.S. shale producers blink? The prices at which companies break even on oil production varies greatly. Guys in the Permian basin can certainly make money at $45. Below that, the air gets more rarefied. Below $40, a lot of these guys are not going to make money.

Will this finally be the event that causes the shale producers to cut production? Maybe, but don't bet on it, at least not yet. One thing that has amazed me about the shale guys: If they have the money, they're going to spend it. They are not particularly good stewards of capital.

Piper Jaffray said they see no signs of a shutdown yet: "Overall, the mood from our E&P contacts was somewhat more reassuring, although not uniform, while our oil service contacts are nervous, though none have experienced any pullback in activity and none have been notified of potential equipment releases."

Stifel notes that we can expect significant reduction in the rig count (currently 747 rigs) once oil gets to $40 and below: at $40 a barrel, they estimate the industry would need to reduce rig counts by 200 to balance cash flows.

Seems like below $40 might be the magic shake-out level.

After years of waiting, MSCI has agreed to include China mainland stocks in its indexes, beginning next year.

It's a big move: MSCI controls the indexes behind some of the biggest exchange-traded funds (ETFs) in the world, including the MSCI Emerging Markets ETF. Since the whole world is moving toward ETFs and passive investing, what goes in these indexes is what investors will be owning in the future.

The company is smartly holding out a carrot to the Chinese regulators: Do more to open up your markets, and we will include more of your stocks. That's a big carrot: Chinese authorities desperately want their markets to be more widely owned outside the country.

Here's the key points:

1) MSCI will take 222 of the biggest names in their MSCI China A International Index (out of 448), and include them in their relevant global indexes in the middle of next year. These are the largest and most liquid names in the China mainland market.

2) Rather than giving a 100 percent market capitalization weighting to each stock, they are giving each stock an initial weighting of only 5 percent of its market cap. That will greatly reduce the initial weighting of the China mainland stocks.

Why is that? Because MSCI wants the Chinese authorities to keep opening up their markets. There's three particular things they want to see:

1) Fewer companies halting their stocks;

2) current limits on how much money can enter or leave the country for stock trades on a single day to be removed or greatly expanded; and

3) to make sure that the crucial Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect works effectively. Those two connections are the primary path that enables investors to trade shares listed on each other's markets using local brokers and clearinghouses.

Essentially, they are holding out a carrot to the Chinese regulators. MSCI wants the market to open up more.

"This is a small step in the right direction. For everyone to get experience — so everyone gets to know everyone — we will start small," Henry Fernandez, chairman and CEO of MSCI, told CNBC.

Should the Chinese continue to open up their markets, MSCI will consider increasing the market cap of the existing 222 companies all the way to 100 percent. It will also consider including the remaining 226 or so companies in the future.

It's a measured move that will build confidence in the international community and encourage even more cooperation from the Chinese.

Apparel stocks dive as the Amazon juggernaut rolls on.

First, it was Amazon buying Whole Foods and threatening to disrupt the grocery business.

Never mind Whole Foods has less than 3 percent of that business, the mere fact that Amazon was involved has been enough to send grocery chains into a tailspin.

Tuesday brought Amazon Prime Wardrobe, where the online retailer tackles the biggest problems of buying clothes: 1) the time it takes to shop, 2) the hassle of finding the size that's right for you, and 3) returning stuff you don't want.

Judging by the market's reaction, it looks like the Street believes Amazon has advanced the ball considerably: Nordstrom closed down nearly 4 percent, JC Penney more than 5 percent, and Ascena Group and Chico's more than 4 percent. Even discounters like TJX and Ross Stores fell 3 percent and nearly 5 percent, respectively.

It's a simple idea: try before you buy, and only pay for what you keep. Pick out three items or more, and you get shipping for free (if you're a Prime member of course). You have seven days to try the stuff on and decide what you keep.

The good news on IPOs for the first half of 2017: There are a lot more of them than last year. The bad news: It's still not great.

Halfway through the year, 66 companies have gone public so far, according to Renaissance Capital. The good news is that 11 more companies are going to try to go public this week and next in a valiant effort to beat the traditional July 4 slowdown. Five companies alone announced terms on Monday, including meal-kit services firm Blue Apron, which will seek to go public next week.

If all 11 make it to market, the total will be 77 companies for the year so far. That's better than last year's miserable showing of 42 but far fewer than the 104 that went public in the first half of 2015, which capped three strong years for IPOs.

This is a mild disappointment, considering the markets are at historic highs and the after-market performance of recent IPOs has been strong. The Renaissance Capital IPO ETF, a basket of roughly 60 of the largest IPOs of the last two years, is up 22 percent this year, far outperforming the 9 percent performance of the S&P 500.

Most of the largest deals of the year have had healthy gains since their IPOs:

Recent IPOs (after-market performance)

Floor & Decor up 110%
Canada Goose up 60%
MuleSoft up 45%
Emerald Expositions up 29%
Cloudera up 14%

Why the outperformance? "Because IPOs are being priced more reasonably, so they have more room to move up," Kathleen Smith from Renaissance Capital told me. "Investors in the IPO market have become hyper-sensitive to valuations."

That's good news: Investors in IPOs this year have been a happy bunch. Issuers, however — who want to get as much product as possible to market — are facing a much more challenging environment.

Still, all it takes is for a big name like Snap, which on Friday approached its IPO price of $17, for investors to get cold feet about other tech unicorns sitting out there.

It doesn't bother Smith, who is interested in investing in companies at the best possible price: Snap going to its IPO price "shakes the market and creates fear. That makes valuations more reasonable."

And that's exactly the big issue for the second half: valuations. Scores of companies still are reluctant to go public because of a valuation gap between their private valuations and what the public is willing to pay for them.

As a case in point, Smith points to Tintri, a cloud platform company that is seeking go public next week. At the midpoint the company would be valued at $389 million, less than half the $785 million valuation during the last round of fundraising in July 2015.

Will we see more like Tintri in the second half? Smith says we will, because some will have to get out the door. She notes that while some companies can afford to wait to grow into a higher valuation, others may not be so lucky. And the haircuts will come, for those that have to get out the door.

She insists that funds that have millions locked up in expensive tech unicorns aren't going to sit on that money forever: "Some of these companies have had investments in these companies for ten years. They have to provide returns to their investors. That means they have to find a way out. There is going to be pressure from the limited partners. And pension companies have a boatload of money in private ventures. They have obligations they have to pay out as well. They can't stay private forever. That is not the business model for the private equity or venture people."

Another issue for the IPO market: out-of-favor sectors. There are dozens of energy IPOs that are waiting to go public, but cannot imagine doing it with oil below $45. And there are plenty of retail companies that also are reluctant to go public in a brutal retail market.

Just ask Blue Apron. You can bet they will be sweating their IPO in light of the Amazon-Whole Foods deal.

Tomorrow afternoon MSCI, one of the world's largest index providers, will decide whether to include a selection of China's mainland stock market into its MSCI Indexes, which underpin some of the largest ETFs in the world, including the iShares MSCI Emerging Market ETF (EEM) and the MSCI ACWI Index ETF (ACWI).

It's a big decision: As I've said many times, indexers now rule the world. MSCI has more than $10 trillion of active and passive assets benchmarked against it, with emerging markets alone accounting for $2 trillion. Hong Kong stocks are already included, but including mainland China would increase the weighting of China stocks in the Emerging Market index from roughly 26 percent to over 40 percent with full inclusion. Acceptance of mainland China would mark a major move forward for China's domestic markets and oblige funds all over the world to invest billions in mainland China.

After its stock pop, Amazon got Whole Foods essentially for free.

For free? Well, if you consider the increase in market capitalization that Amazon is seeing midday, the answer is yes.

Here's the math:

Amazon is paying $13.7 billion in cash for Whole Foods.

Amazon's stock was up $32 and change mid-morning. There are 478 million shares outstanding, so Amazon's market cap has appreciated by about $15.6 billion today.

So, you could argue, they are getting Whole Foods for free, and pocketing $1.9 billion as well.

By the way, here's the joke going around trading desks on Wall Street: "Jeff Bezos said to Alexa, 'Buy me something from Whole Foods,' and Alexa bought Whole Foods."