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Paulson Proposal A Bit "Mind-Less" For Markets

In theory, Treasury Secretary Paulson's announcement that he wants to shake up the regulatory environment on Wall Street is the main news.

Lehman's Roger Freeman noted that the new rules, which include a proposed merger of the SEC and the Commodities Futures Trading Commission, would benefit the NYSE and NASDAQ, "as the proposal calls for a simpler SRO [Self-Regulatory Organization] rule-making process among other things, which should make these exchanges more competitive." It would also likely increase trading volumes.

In reality, traders' minds are not focused on this proposal--it will not come to fruition for a long time; implementation is far away, and the second quarter is very, very close. Traders are concerned that bulls have been wrong about the first quarter--that it is not the bottom, not for the economic news and possibly not for the credit crisis.

Analysts have been taking down estimates for the first quarter for weeks, for everything from retailers to financials to oil refiners.

Earnings estimates for the S&P 500 are already negative for the second quarter (-1.8 percent); financials estimates are already down over 30 percent. There are new calls that the second quarter will be the bottom. Skepticism is very high now; this is good news, as it is well known that there are large amounts of cash on the sideline.

Elsewhere:

1) Schering-Plough down 22 percent (!) and Merck down 13 percent pre-open on a study that showed that the companies cholesterol lowering drugs Vytorin and Zetia were not more effective than less expensive drugs. Vytorin (which is a combination of Merck's Zocor and Schering's Zetia) is a big money-maker for Schering, accounting for 60 percent of its EPS.

2) Driller Noble up 4 percent on word it has signed a memorandum of understanding with Brazil's Petrobras for deepwater drilling rigs--the contracts are worth up to $4 billion.

2) Philip Morris International finally begins trading today under the ticker PM. The international business is growing much faster than the domestic tobacco business; Philip Morris USA will remain part of Altria Group.


Questions? Comments? tradertalk@cnbc.com

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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