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Rally To The Ben

AFTER HOURS ACTION: YAHOO

The headline:Yahoo Inc Shares Fall Nearly 7% On Weak Earnings

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Yahoo Inc (YHOO) reported a drop in quarterly profit on Tuesday and its shares fell nearly 7% as CEO Jerry Yang predicted a tough 2008 amid a weakening U.S. economy, explains Melissa Lee who's in for Dylan Ratigan. Also Yahoo cut about 1,000 workers.

I think it’s really hard to make a bullish case for this stock, says Jeff Macke. I don’t know how trade the news other than to say eventually shares should bounce.

It could be an opportunity for Microsoft to buy out Yahoo!, says Pete Najarian. But right now I don’t see a reason to own YHOO stock.

I wonder what it means for Google , adds Guy Adami. I don’t know if the problems are the same but I’ve noticed the numbers are moving down in GOOG.

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RALLY TO THE BEN

The headline:Dow Posts Second Solid Gain in a Row Before Fed Decision Wednesday.

Investors bid the Dow and the overall stock market higher again with hopes riding on the Federal Reserve which is expected to announce another rate cut Wednesday, explains Melissa Lee.

The bond markets suggest to me that the Fed will cut by 50 bps, says Guy Adami.

I agree, adds Jeff Macke.

I expect to see a 25 bps cut says Karen Finerman, but it’s the language the Fed uses that’s most important. Watch what they say about growth, inflation and guidance.

If the Fed only cuts by 25 bps look out below in the Financial Select Sector SPDR , says Pete Najarian. I think a 50 bps cut is already priced in.

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BANK ON IT

The headline:
Banks, Brokers Lead Market Again as Traders Bet Another Rate Cut Will Ease Credit Crisis.

JPMorgan shook off rumors of a loss and investors snapped up shares of JPM as well as Wells Fargo (WFC) on a bet that lower interest rates will boost profits, explains Melissa Lee.

I think ’07 was the year to sell rallies – ’08 is the year to buy dips, says Guy Adami. I like U.S. Bancorp (USB) in the space.

The president of Goldman Sachs sold $6 million dollars of GS stock, adds Pete Najarian and that’s not something you see everyday. I think that plays into what direction the stock could be going, he says.

Lehman Brothers (LEH) upped its quarterly dividends as well as its buyback , says Jeff Macke. Things might not be as bad as they seem at LEH.

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SUBPRIME BEEF

The headline: Banks Give Up Some Gains After FBI Opens Inquiry Into Subprime Mortgage Probe.

The FBI opened a criminal inquiry into 14 companies regarding the mortgage crisis but would not identify the companies under investigation, explains Melissa Lee.

I think somebody somewhere is going down, says Jeff Macke. It’s clobbertime!

This doesn’t seem like a big deal to me, says Karen Finerman.

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CORNELIUS VANDERBILT'S PORTFOLIO?

The headline: Old Economy Stocks Such as Chemical, Coal, Fertilizer, Rail Names Doing Well.

The rails are a play on ag and coal which are transported by freight trains, explains Guy Adami. Three rails all reported great numbers, and of them I think Burlington Northern is the buy. Also check out Dupont (DD) as a synthetic ag play, he says.

Everytime BNI goes under $80 I’ve noticed that Warren Buffet buys more stock, explains Pete Najarian. And in agriculture, I think investors should look at Dow , he adds.

On a related note, both Pete Najarian and Guy Adami recommend Peabody (BTU) as well as Joy Global (JOYG) or Arch Coal (ACI) in the coal space.

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COSMOS PREDICT MORE TURBULENCE

The headline: Mercury's 'Retrograde' Phase May Cause Businesses To Suffer 'Crashes, Unexpected Failures' Says AstrologyWeekly.com; During 3-Week-Long 'Retrograde' Phase, Mercury Appears To Be Moving Backwards

In other words, there could be communications problems over the next 3 weeks, says Jeff Macke. Traders are a superstitious bunch so you might want to play it cool.

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Trader disclosure: On Jan 29, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (DIS), (YHOO), (EMC): Najarian Owns (BIIB), (C), (CSCO), (ETFC), (MS), (MSFT), (MCD), (XLF); Najarian Owns (WEN) Calls, (AAPL) Calls, (YHOO) Calls, (EBAY) Calls; Finerman Owns (GS); Finerman's Firm Owns (TSO), (VLO), (WMT), (YHOO), (SUN); Finerman's Firm Is Short (MDY), (IYR), (IJR), (SPY), (CLWR); Finerman's Firm Is Short (LEH) And Owns (LEH) Puts

Symbol
Price
 
Change
%Change
DJIA
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DOW
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GS
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JPM MLP ETN
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MSFT
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SPDR FIN SEL
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YHOO
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GOOGL
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