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Pisani's Trader Talk: Good Signs in Market Fundamentals

CNBC's Bob Pisani reports what traders are telling him on the floor of the New York Stock Exchange:

As the T-Bill flight-to-quality rally continues to wane, market participants are finally turning their attention to market fundamentals--and liking what they see.

Bob Pisani on the floor of the NYSE.

First, Dubai World is investing up to $5.2 billion in MGM Mirageat a nice premium. About half of that is for a direct 9.5 percent stake (at $84 a share) in the company, while the rest goes toward MGM's CityCenter project. That means the Dubai government becomes major player in Las Vegas--more evidence of the globalization of investing. MGM rose 7 percent, while rival Boyd Gaming saw a 3 percent rise.

Second, BHP Billitonreported great results and raised its dividend, a sign of confidence in the future of the company's earnings stream.

More importantly, BHP notes that recent dislocations have not hurt the global demand for commodities, and incoming CEO Marius Kloppers said BHP will be "as aggressive as we have been in the past" in seeking acquisitions. BHP up 3 percent, and metal stocks in general are up 3-6 percent.

Note also that Aluminum Corp of China launched higher on positive comments.

Most traders do not think Bernanke will lower the Fed Funds rate, but they do think he will lower the discount rate another 50 basis points to 5.25 percent (equal to Fed Funds rate) if he needs to. The fact is, nerves have calmed considerably since Friday morning.

Still, two potential flies in the ointment remain:

  1. The rollover of asset-backed commercial paper (ABCP) must occur smoothly. There is $1.12 trillion in ABCP outstanding, most of it with terms of under 30 days, according to Tony Creszenzi at Miller Tabak, author of Stigum's Money Market. New data on the commercial paper market will be available tomorrow and will be widely watched. Traders want to see a robust market.
  2. $300 billion-plus in leveraged buyout (LBO) loans need to be floated in the coming months. First up: First Data Corp., which will begin marketing $22 billion in loans and bonds in the beginning of September. Traders are delighted the company expects the deal to close by end of September.