Stocks Fall Ahead of Fed

CRUDE RETREATS FROM RECORD; DOLLAR HITS 3-WEEK HIGH

The headline: Crude Oil Sheds 2.6% to $115.63 as Dollar Gains; Commodity Prices Drop Most in Five Weeks

Commodities slumped on Tuesday as speculation about a possible pause in U.S. interest rate cuts strengthened the dollar, hammering almost all energy, agriculture and metals markets. Crude oil futures settled 3 percent down in New York after falling below $115 a barrel at one point, nearly $5 off the previous session's record highs.

It’s hard to say if the dollar has bottomed but it is definitely showing an improvement, Karen Finerman said.

Pete Najarian said it’s clear there’s a commodities rotation occurring as investors take some gains, but it’s probably just a small pullback in the scheme of things. On the oil front, he said he noticed heavy put buying in the U.S. oil fund .

Guy Adami recommended Baker Hughes as an oil trade.

AFTER HOURS ACTION: CITIGROUP

The headline:Citigroup Begins Offering of $3B in Common Stock

The troubling thing about this to Karen Finerman is that the company didn’t say anything about having to raise more capital.

But Guy Adami wasn’t surprised. They all say one thing and do another, he said.

And $3 billion is nothing to Citi, according to Jeff Macke.

AG-GRAVATED ASSAULT

The headline:AGCO’s Disappointing Full-Year Forecast Hammers Agriculture Stocks; With the Dollar Bottoming, Is the Amazing Ag Trade Done?

The biggest risk to the ag trade is if there is a big groundswell against ethanol, Karen Finerman said. The stocks are all more likely to trade down on that than anything that happens in the currency markets.

Pete Najarian disagreed, saying that ethanol is far from the driving force behind the successful ag stocks – they’re going higher because of global demand increasing, and that doesn’t look like it’s likely to stop, he said.

MERCK PLUMMETS 9% ON DRUG REJECTION

The headline: Merck Shares Fall After FDA Rejects Experimental Cholesterol Drug

European Union regulators recently gave their blessing to Merck’s drug and it was a surprise that the FDA rejected it, Pete Najarian said. On the bad news, Pete thinks MRK stock is getting extremely cheap at these levels.

Jeff Macke’s advice to Pete? “Surrender on Merck already.” The company keeps getting bad news after bad news. This is another big hit to its pipeline.

On biotech, Guy Adami said Genentech has pulled back to attractive levels – levels lower than where it was when it got the news that Avastin was approved for breast cancer treatment. It’s capitulation time in DNA, Adami said.

BEST VIDEO GAME EVER

The headline: Take-Two Releases New ‘Grand Theft Auto’ Installment to Glowing Reviews

Michael Pachter, an analyst for Wedbush Morgan Securities, said he thinks GTA4 could be the “best game of all time” with the highest ratings, best reviews and the best sales. But that doesn’t mean it will force Electronic Arts to increase its hostile takeover bid for the game’s proprietor, Take-Two.

GTA4 won’t be a game changer no matter how well it does, Pachter said, because TTWO is still mismanaged. Even if the game surpasses Halo as the best-selling video game of all time, as Pachter suspects it could, that won’t be enough for ERTS to suddenly want to increase its $26 per share bid for TTWO.

MICHAEL PACHTER
Wedbush Morgan Securities Is A Market Maker In (ERTS)
Wedbush Morgan Securities Is A Market Maker In (TTWO)