Regardless of when a bill in Congress is passed, traders are already talking about the next round of big headlines. Here are the three I am hearing are most likely:
1) earnings cuts in retailers, autos, energy. Analyst estimates have been coming down notably in recent weeks for the third AND fourth quarter. Many companies will pre-announce within the next two weeks.
2) new "circuit breakers" for individual stocks. There is a good chance that the ban on short selling in financials will be extended, but there's also work on a "broader" way to address short selling in general. This includes bringing back the uptick rule, but also under consideration is some kind of "circuit breaker" for individual stocks, where, for example, a stock down 10 percent might hit certain "circuit breakers" like closing for a few minutes.
- Citigroup to Buy Wachovia's Banking Operations
- Hedge Funds Prepare to Reveal Short Positions
3) hedge funds closing. Lots of talk, getting louder, that a number of big hedge funds will close this year. Speculation that much of the money going into money market funds recently is due to hedge funds essentially going to cash in preparation to close. It means lower trading volumes, less liquidity, at least until they reopen under a new name.
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