Morning Coffee with TradingMarkets

  • December 11, 2007
  • David Penn

Good Morning!

Stocks Rally Ahead of the Fed…MBIA Gets $1 Billion Investment…WaMu To Raise $2.5 Billion Through Preferreds, Cut Dividend…Texas Instruments Ups Earnings Forecast…Conrad Black Gets Six and a Half…FOMC Announcement at 2:15 PM…Asia Up…Europe Down…The dollar lower against the pound, steady against the Euro…Futures are trending higher an hour before the bell.

Having bought the rumor, will the markets sell the news? Yesterday’s strength in the market — especially in the blue chips and S&P 500 — left us even more overbought than we were before. One guarantee is a lot of volatility in the hours leading into and out of the FOMC announcement today at 2:15 PM, Eastern. So be careful out there.

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TradingMarkets 5 Business Stories You Need to Know

Ben, the Fed, and the “Fool in the Shower” – Bloomberg

Would looser monetary policy be wisely pre-emptive, or would it be an overreaction that invites inflation? So far the Bernanke Fed looks to err on the side of easier credit.

Is Mortgage Bubble Worse Than S&L, Dot-com Crises? – Wall Street Journal

The inflation gauge favored by the Fed suggests rates cannot be cut as deeply as some are suggesting.  Bond fund managers, including Pimco’s Gross, beg to differ.

Chinese Inflation Highest in 11 Years – Bloomberg

The rate of inflation in China is faster now than at any point in more than a decade. Pressure mounts to raise interest rates, let currency appreciate in bid to cool overheating economy.

Black Sentenced to 6.5 Years for Fraud – New York Times

Former head of Hollinger International, Conrad Black found guilty of fraud and obstruction of justice. Serving full sentence would keep Black behind bars until he turned 70.

Private Equity Plows $1 Billion into MBIA –Wall Street Journal

Private equity firm Warburg Pincus boosts MBIA’s capital base in bid to keep the bond insurer’s triple A credit rating intact.

» For more stories as they happen, go to our Breaking News section.

TradingMarkets 7 Stocks You Need to Know for Today

Here are 7 stocks for traders for today from TradingMarkets.com:

» For a list of today’s highest PowerRating stocks, click here.

TradingMarkets 5 Top PowerRatings Stocks for Today

Company
 Symbol PowerRatings
Restoration Hardware RSTO 9
Sohu.com SOHU 8
Coley Pharmaceutical Group COLY 8
Flir Systems FLIR 8
Pharmion Group PHRM 8

» View More Stocks

TradingMarkets Tracking the Wizards

Penta Fund Up 123% on Asia Focus – Reuters

Run by former Soros Fund Management trader, John Zwaanstra, the $4.8 billion dollar hedge fund group is up big in two of its funds due to winning bets on China.

Sloane Robinson Posts 40+% Gain Year-to-Date – Financial News Online

SR Global International Fund is one of the top performing funds in Europe this year. Long/short equity fund down 3% in January, 2% in August, but up 41% through end of November.

Einhorn Likes Microsoft, Target –Reuters

Although known for his short side wagers against companies like MBIA, David Einhorn of Greenlight Capital says there are plenty of opportunities on the long side, as well.

» View Portfolios of Prominent Investors

TradingMarkets Playbook

The short version? As the FOMC announcement goes, so goes the market. Although a few more opportunities are surfacing in among our higher, PowerRatings stocks, the market remains overbought, and a pullback could happen at any time. Typical intraday volatility around the time of the announcement should be expected, and could provide some market participants with the excuse they need to take profits.

But any such profit-taking should be viewed through the lens of a market that is (a) overbought in the short-term, and (b) fully in the hands of the bulls. Unless something dramatic happens to embolden those looking to knock stock prices lower, buyers are likely to continue to have momentum on their side before and after the Fed announcement later today.

David Penn is Senior Editor at TradingMarkets.com.

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