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Market Rally? Here's Why It Happened

Tuesday, 13 Nov 2007 | 1:09 PM ET

Huh, what happened? With the understanding that we are still midday, here's the reasons for the rally:

1) The primary driver is that stocks have been dramatically oversold, and in the case of financials, heavily shorted;
2) Goldman affirmed they were still the smartest guys on the Street by saying there would be no significant write-downs from mortgage derivative losses;
3) A lack of bad news: no other banks or brokers had anything significantly negative to say (JP Morgan's CEO said "We're fine" on CDOs and subprime exposure, B of A's CFO said losses were "manageable"), and
4) Wal-Martdid not lower fourth quarter guidance.

Bears are not impressed. They point out that:

1) It is common for there to be brief snap-back rallies when markets are in a notable downtrend (these are the classic bull traps);
2) If Goldman says they are not taking write-downs with high levels of CDO exposure, there must be significant counterparty risk out there somewhere;
3) There is plenty of other retailers likely to lower Q4 guidance, and
4) In case you haven't noticed, it's the close that matters nowadays.


Questions? Comments? tradertalk@cnbc.com

  Price   Change %Change
BAC
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GS
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JPM MLP ETN
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WMT
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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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