Pisani's Trader Talk: Another Selloff May Be Ahead
CNBC "On-Air Stocks" Editor
CNBC's Bob Pisani reports on what traders are telling him at midday.
Some random thoughts:
- Expect another attempt to sell off markets today. Bears tried at the open, and failed. Key sectors like financials and materials holding up. Energy still seeing some weakness as momentum players lighten up.
- The initial reading on Q2 GDP shows growth of 3.4%, or 0.2% more than expected. Not too much stronger. The core PCE quarter-over-quarter gain was 1.4%, right in line with expectations, but the overall price deflator was up 2.7%, which was less than the consensus of 3.4%. That's good news. Remember, a lot of traders have now begun clamoring for a rate cut. This news, at least, does not eliminate that possibility.
- A Citigroup analyst says Fannie Mae & Freddie Mac have over a trillion dollars of loans on their books. Seem high? Not compared to the total numbers. One trader noted that between them they have nearly a trillion dollars in loans on the books. Even the analyst said the two could "easily ride out" the subprime turmoil.
- Charles Biederman at TrimTabstells me that there were 29 new buybacks announced yesterday. That is the largest number announced in a single day since just after 9/11. Panic selling, record buying....hmm.
Ahead of the market's open, Pisani was talking to traders about these questions:
Can we get an oversold bounce looking like a possibility?
- Yes, at any moment. A surprising number of traders have covered some shorts today.
What will happen today?
- The risk is to the downside, because the markets can easily drop another 3% to 5% before a sufficiently large number of people ask questions about oversold conditions.
- There has been a lot of technical damage, and we're approaching the weekend.
- Q2 GDP may not have the impact it usually has. Traders yesterday were already saying that the world was a different place from Q2 in light of the tightening in credit.
- In fact, we're seeing if the strong GDP may be a negative, since traders are now agitating for a rate cut from the Fed.
Can we get a sustainable bounce?
- If the market comes to believe that the Fed will step in and lower rates later in the year, that would help.
- Also, clear signs in a month or two that banks and brokers were able to sell some of their LBO debt will go a long way toward calming markets.
What is the main bear argument?