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Fed Liquidity "Pump" Could Produce Year End Rally

Is the Fed actions to pump liquidity into the system a deal changer? The coordination with other central banks is certainly impressive, but more importantly it increases the chances for a rally into the close of the year.

Many traders put short trades back on financials yesterday after the Fed's disappointing rate cut and statement; they have now served notice that they are once again alert and trying to address the liquidity crunch.

So "Don't Fight the Fed" is definitely back.

However, we are not out of the woods yet. Traders now have to face the significant headwinds from slowing earnings growth and a slowing economy. Look at the poor commentary this morning from Bank of America , Wachovia , and Office Depot . Morgan Stanley takes a smack at Citi by naming it Short of the Year for 2008.

Already, some skeptics trying to sell into rally in financials. Citi at a new low.


Questions? Comments? tradertalk@cnbc.com

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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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