Oil Hits Record; Stocks Fall
WACHOVIA WHACKS FINANCIALS
The headline: Wachovia Plunges $10 on $393M Loss, Dividend Cut, Need for Capital; Traders Brace for Financial Earnings Deluge
Just last quarter Wachovia said it would not have to cut its dividend, Guy Adami noted. “You can’t believe any of what these guys say.”
That said, he thinks WB sets up for an “easy” trade here. He would get long with extremely tight stops to limit downside.
Jeff Macke agreed that a lot of the financials are so low that they make for some tight risk-reward trades. The bad news is expected in these names, he said, which makes them less dangerous to own when, invariably, that bad news materializes.
Pete Najarian recommended the XLF instead of buying any one money center bank – save for maybe U.S. Bancorp (USB), which has ultimately spared itself from subprime.
OIL RECORD CLOSE
The headline: Crude Oil Adds 1.5% to $111.76, Record Close, as Dollar Continues Slide
Play record oil with the integrated oil service companies, Guy Adami said. Baker Hughes (BHI), Schlumberger (SLB) and Halliburton (HAL) are all buys as far as he is concerned.
Adami also reiterated his bullishness on the natural gas stocks. Even though many are at 52-week highs, a lot of the stocks in the nat gas space still have reasonable valuations, he said. Whenever there’s a pullback, he thinks the whole sector is up for grabs.
Pete Najarian added Diamond Offshore (DO) and Transocean to Adami’s refiner list and also included Suncor (SU), which has exposure to oil and gas in Canada.
AFTER HOURS ACTION: CROCS
The headline: Crocs Cuts Earnings and Sales Forecasts for First Quarter, Full Year
Karen Finerman, a one-time bull on Crocs, said she’d like to find out what hurt sales, although she has her suspicions that it was largely the company’s U.S. business.
There’s “nothing good” about Crocs, Jeff Macke added.
The headline: Circuit City Soars 27% After Blockbuster Makes Unexpected $1.3B Takeover Bid
This announcement makes “zero sense” to Jeff Macke. Is it just Blockbuster activist shareholder Carl Icahn putting money to work? In any event, Macke said he remains in a state of “utter bafflement” about why these two companies should merge.
FINALLY CLEARED FOR TAKEOFF?
The headline: Delta , Northwest May Announce Long-Awaited Merger Tuesday: WSJ
We’re approaching a flashpoint for the airline industry, according to Pete Najarian. As low-cost carriers continue to drop like flies thanks to fuel costs, competition is likely to deteriorate further in the form of mergers. The Delta-Northwest deal is coming, and it won’t be the last. He speculated that United (UAUA) could merge with Continental (CAL), leaving three major domestic carriers when American (AMR) is thrown in. Good news for shareholders? Sure. But for passengers? Not likely.
CRANING & CATERING
The headline: Crane Giant Manitowoc (MTW) to Buy Food Service Equipment Supplier Enodis For $1.9B
Early-cycle industrials are still showing they are good places to put money to work, Guy Adami said. Electrical equipment maker Eaton's solid earnings should bode well for other industrials like United Technologies and Honeywell , according to Adami.
THE BEST DEFENSE IS A GOOD DEFENSE
The headline: Lockheed Martin (LMT) Moves Higher After Goldman Sachs Adds It to Industrials Favorite Value List
Guy Adami would look for LMT’s earnings to be the tea leaves for Raytheon (RTN) earnings. Both stocks are great, he said, but RTN is a bit cheaper.
SURGING FROM THE SOIL
The headline: Fertilizer Names Potash , Agrium Continue Strong Rally
These stocks keep making higher highs and higher lows. And no one wants to short them. Pete Najarian noted that Terra Industries (TRA) is the only stock of the bunch with any material short interest, and that could actually push that stock higher if the shorts are squeezed.
Agrium looks the best to Guy Adami, who said its chart “doesn’t lie.”