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Five Things We're Watching: March 7, 2011

Violence escalates in Libya, the Rajaratnam trial gets underway and California faces its continued deficit problems.

Here's some of what we’re watching—and therefore you should as well.

Libya Erupts: Numerous counter-offensives by Khaddafy loyalists led to disputed reports over just who remains in control of various strategic towns in Libya.

Supporters of Libyan leader Moamer Kadhafi hold his pictures as they take part in a pro-government rally in Tripoli on February 17, 2011 as the country faced a nationwide "Day of Anger" called by opposition cyber activists.
Mahmud Turkia | AFP | Getty Images
Supporters of Libyan leader Moamer Kadhafi hold his pictures as they take part in a pro-government rally in Tripoli on February 17, 2011 as the country faced a nationwide "Day of Anger" called by opposition cyber activists.

What's not disputed is that all signs point toward a prolonged civil war, setting up further upward moves in oil markets and corresponding pressure on equities ahead of Monday trading.

With an apparent "day of rage" planned Friday in Saudi Arabia and the country's government throwing down the gauntlet—announcing a police enforced ban on all protests—events in the region and the crude trade look set to dictate the week ahead.

Raj on Trial: Proceedings begin Tuesday in the eight-week trial of billionaire hedge fund mogul Raj Rajaratnam—the founder of the Galleon Group—who faces 14 criminal counts in what authorities have called the largest hedge fund insider trading case in history.

The critical evidence may come in the form of wiretapped phone calls between Raj and Galleon employees—phone calls deemed admissible only after a long pre-trial fight between both sides.

The case has sent shockwaves across Wall Street, most recently ensnaring former Goldman Sachs director Rajat Gupta, and more broadly raising questions about how investment firms get their information.

California Dreamin' for Dollars: It's all on the table as California prepares for a midweek budget showdown in Sacramento, against the backdrop of a crippling $25 billion deficit.

Spending cuts and tax hikes are in play… not to mention the pension reform that 72-year old Governor Jerry Brown is advocating.

We'll talk to the man trying to keep the Golden State's deficit from widening, as State Treasurer Bill Lockyer joins The Strategy Session at 12:00p ET.

Remember the Crash: The wounds of the financial crisis are fresh, but what a two years it's been since the S&P 500 dipped to a hellish intraday low of 666.79 on March 6, 2009.

Despite the recent pressure from rising oil, the broad market index has nearly doubled that demonic number, handsomely rewarding investors bold enough to make bets at the bottom.

Bob Pisani digs into where we've been and where we're going (Click here for Trader Talk blog).

Fed in Focus:With the jobs report in the rear view mirror, the next destination is the upcoming Fed meeting on March 15.

Our Steve Liesman is in Chicago Monday for an exclusive interview at 9:00am ET with Chicago Fed President and FOMC member Charles Evans, who's about as close as you get to the center of the policy debate inside the Fed.