Trader Talk

Market Rally Hopes Rest On Bernanke Speech


Thoughts of a decent rally this week rest largely on the hope that Ben Bernanke will address the slowing economy at his Jackson Hole speech this Friday. They are emphasizing that, since the FOMC meeting August 7th, things HAVE changed, the Fed HAS seen more risk (e.g. they cut the discount rate), and Mr. Bernanke will address those increased risks on Friday.

Also on Friday: personal consumption expenditure (PCE), a look at inflation at the consumer level. A lower PCE number will make it easier for the Fed to cut rates at its Sept. 18th meeting.

After that, traders are looking to the beginning of the roadshow for the First Data LBO financing, which will begin next week. Traders note that a warm reception will make a huge difference to the markets.

Headline risk remains a major problem. Cheyne Finance, a U.K.-based hedge fund founded by ex-Morgan Stanley partners, is the latest fund to get caught in the asset backed commercial paper woes after S&P downgraded its commercial paper and mezzanine notes. They are seeking to restructure after being forced to start selling assets to pay down debt. Their Cheyne Finance fund, with $6.6 billion, borrowed short-term money and then invested in longer-term securities in the asset-backed bond market.

Dillard's reported earnings well below expectations. They blamed lackluster sales that necessitated higher markdowns. This is for the period ending August 4th.

It's not just software they're copying: DaimlerChrysler and BMW are threatening legal action over Chinese-made vehicles that they claim are copies of their own models. German chancellor Angela Merkel, in a speech in Beijing, said plagiarism and copyright infringement was a "big problem."

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