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Market Is Somewhat Overbought

Tuesday, 5 Jul 2011 | 10:38 AM ET

After a big run last week, the market is somewhat overbought...key story will be nonfarm payrolls Friday, then it's all about earnings. Expectations are low, which is why economic reports can move stocks.

Bulls insist we're on our way to solving most of the issues, at least temporarily: the Greece bucket getting kicked down the road, China fears moderating, U.S. economic numbers looking marginally better, Japan starting to come back on line. Now what we need is a clearer debt ceiling "mini-plan." Is that possible?

Maybe. US Senator John Cornyn of Texas said on Fox News Sunday that the GOP might accept a "mini deal" with President Obama that would temporarily raise the debt ceiling.

Much talk over the weekend about how the most important cyclical sector — transports — were hitting new highs last week, particularly the railroads: Norfolk Southern (NSC), Union Pacific (UNP), and CSX (CSX), as well as truckers Ryder (R), Con-Way (CNW).

Meantime, America's most unloved sector — financials — had a terrific week and they too are getting a lot of chatter. Of particular note were the consumer financial stocks that hit highs as last week ended:

American Express and Discover Financial hit multiyear highs; Franklin Resources , Mastercard and Visa also hit new highs, the latter two on a favorable ruling on debitcard interchange fees. Visa will give an update on business this week.

Precious metals stocks like Hecla , Yamana , First Majestic and US Gold also up this morning as gold and silverpost gains.

Elsewhere:

1) The ECB is expected to raise rateson Thursday, even though there are indications the European economies are slowing down. Fighting inflation is the prime directive for central banks over there, remember.

2) Bidding war continues: Energy Transfer Equity (ETE) raised its offer to acquire natural gas pipeline firm Southern Union (SUG) by 21 percent. The new $5 billion offer also slightly exceeds the rival $4.9 billion ($39/share) cash offer made by Williams Companies (WMB). Unlike its prior all-stock offer, under its new offer, Energy Transfer Equity will allow Southern Union shareholders to exchange their shares for $40 in cash or 0.903 shares. However, the cash component of the entire deal's value cannot exceed 60 percent.

3) Not again! ExxonMobil trades 1 percent lower after oil from a Montana pipeline spilled into the Yellowstone River over the weekend. While the company downplayed the extent of the spill, Montana's Governor Brian Schweitzer raised concerns that oil could have already traveled much further than the 10 miles ExxonMobil is currently estimating.

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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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