STOCKS RETREAT FROM 3-MONTH HIGHS
The headline: Stocks Surrender Early Rally Ahead Fed Cuts by Quarter Point, Indicates Pause Is Likely
The Fed’s move was expected, Pete Najarian said. It was the late-day sell off in financials that was surprising. Once again, the XLF failed to break the $27 point of resistance even though the only drag on the index was Citigroup (C), he said.
Even though stocks closed lower, April is in the books and was the best month for the S&P since December, 2003. Najarian called it a “relief rally” that was much needed after the Bear Stearns fall in March.
That might sound like a great statistic, but remember that the market is still lower for the year.
WSJ: MICROSOFT ANNOUNCEMENT ON YAHOO IMMINENT
Jeff Macke said, as a Microsoft shareholder, he would rather the company walk away from the takeover than raise the bid. Some are saying Yahoo expects Microsoft to go as high as $39, which Macke thinks is insane. Microsoft does not need Yahoo, he said.
Pete Najarian disagreed, saying the merger is necessary for Microsoft to contend with Google’s (GOOG) dominance in search.
Karen Finerman reiterated her wish that Microsoft takes its offer straight to Yahoo shareholders. That would move the ball forward, she said.
GOOGLE JUMPS 3%
The headline: Google Among Nasdaq’s Strongest Performers Wednesday
The stock surged after Google CEO Eric Schmidt told CNBC that the YouTube unit is becoming profitable.
Even if that’s true, YouTube is a drop in the bucket for Google, Jeff Macke said. Pete Najarian said the stock is cheap on a price-to-earnings basis relative to the rest of the space, even though the stock has been ramping since its earnings release weeks ago.
EXXON LEADS ENERGY STOCKS
The headline: Oil Drops 2% on Stockpile Increase; Exxon (XOM) Pops After Raising Q2 Dividend
The best way to play oil is in the oil services names like Halliburton (HAL) and Baker Hughes (BHI), Guy Adami said.
Pete Najarian went for natural gas. Even though nat gas stocks have had big runs, he thinks the overall trend is still higher in these names.
The headline: First Solar Posts Ninefold Increase in Profit, Trouncing Estimates
First Solar is killing its competitors because it has a proprietary technology that does not require the use of polysilicon panels, which are expensive and less efficient, Pete Najarian said.
AFTER HOURS ACTION: STARBUCKS
The headline: Starbucks Reports 28% Decline in Profit, Cuts Target for New Stores
The company is announcing plans to add smoothies to its menus, which Jeff Macke finds ridiculous because he doesn’t see how it could lead to increased revenues when the company would have to spend money on new machinery and then deal with longer lines at the stores.
OPTIONS ACTION: GIANT INTERACTIVE
The headline: Pete Najarian Seeing Heavy Call-Buying in Chinese Online Gaming Company Giant Interactive (GA)
Giant Interactive had its biggest day since it started trading options last year, according to Pete Najarian, thanks to the busiest day for online gamers in China. Najarian just put a position on in this stock.
GM SOARS 9%
The headline: GM Shares Speed Higher on Smaller-Than-Expected Loss
Guy Adami would rather buy Ford (F), which actually posted a profit, however small. He also recommended TRW (TRW) and BorgWarner (BWA), for exposure to auto parts.
WHY DID FED DISAPPOINT?
The headline: What Didn’t Investors Like About Rate Cut?
The market was looking for a clear signal that the central bank was going to pause, Deutsche Bank’s Joe Lavorgna said.
But he doesn’t think the cuts are necessarily done. There’s still a lot that could happen between now and the next Fed meeting in two months. For instance, while Friday’s jobs report is probably priced in to the market already, next month’s could still be bad and that could change the whole dynamic, Lavorgna said.
Even though Wednesday’s Fed statement was devoid of the usual “downside risks to growth remain” remark, don’t be so sure that Bernanke has exited the picture.