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The headline: Oil Drops The Most Since April
The Dow [.DJIA
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]ended higher on Tuesday, led by technology companies such as Apple [AAPL
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] as a sharp drop in crude oil prices rekindled hopes of increased consumer and business spending on tech gear.
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IS THE OIL TOP IN?
The headline: Crude Oil Slips 2.5% To $128.85, Lowest Settle Price Since May 19.
A 2.6 percent drop in oil prices [US@CL.1
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] to almost $128 a barrel was welcomed by stock market investors after crude hit a record above $135 last week, a spike that fanned worries about inflation and the outlook for corporate profits.
Whether it’s a bubble or whether the top is already in, I think the oil trade could get ugly.
The UltraShort Oil & Gas ProShares [DUG
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] which trades inversely to oil closed higher, adds Guy Adami. That could signal the short term top to this trade.
I’d look at the oil services and exploration stocks, adds Pete Najarian. I like Baker Hughes [BHI
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].
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APPLE, CHIP STOCKS BOOST TECH
The headline: Apple, Chip Shares Trade Higher After Industry Group Cites Growing Demand For Electronics.
Shares of Apple [AAPL
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], the maker of the iPhone and the iPod, jumped 2 percent, while Google [GOOG
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], the leading Internet search company, gained almost 3 percent on hopes that as oil prices settle, consumers and corporation will become more willing to open their wallets.
I think we’re in an early stage of a tech recovery, says Guy Adami. But I wouldn’t rush in right now, either.
Look at Cisco [CSCO
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] and Juniper [JNPR
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] for the 3G buildout, counsels Pete Najarian.
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HEX ON MOBIL?
The headline: Exxon Mobil Leads Energy Stocks Lower Ahead Of Annual Meeting Wednesday.
Exxon Mobil [XOM
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] chairman and CEO Rex Tillerson will have a fight on his hands Wednesday as descendants of John D. Rockefeller, the founder of Exxon Mobil attempt to separate the jobs of chairman and CEO.
Separating the leadership roles, they argue, would better position the company for challenges to come.
The Rockefellers want Exxon to put money into alternative fuels, exclaims Jeff Macke. That doesn’t make sense, they’re an oil company!
They have so much money, I think they’re doing the right thing by diversifying counters Karen Finerman.
XOM would look attractive to me with an $86 handle, adds Guy Adami.
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OPTIONS ACTION: BANK OF AMERICA
The headline: Pete Seeing Heavy Put-Buying In Bank Of America.
I see put heavy put buying in Bank of America [BAC
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], reveals Pete Najarian. That suggests to me that there could be more downside in the financials.
Meanwhile, Bank of America forecast a second-quarter loss for Lehman Brothers [LEH
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] and cut its earnings outlook for Morgan Stanley [MS
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] and Goldman Sachs [GS
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], and said brokers may continue to underperform in the current challenged credit environment.
If you want to trade the space, I’d look at American Express [AXP
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], Visa [V
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] or Mastercard [MA
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], adds Najarian.
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GM HITS 27-YEAR LOW
The headline: GM Shares Sink To Lowest Since 1981 On Citigroup Downgrade.
Shares of General Motors [GM
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]closed lower Tuesday following a downgrade of the company's stock. Citi Investment Research analyst Itay Michaeli cut his rating on the Detroit company to "Hold" from "Buy" and slashed his price target to $21 from $32, saying the automaker will likely burn through $7 billion in cash through 2009 and may need to raise more capital.
If you want to play this space go downstream and look at Borg Warner [BWA
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], says Guy Adami, as well as American Axel [AXL
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].
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CHINA NEEDS YOU
The headline:Cash-Strapped U.S. Consumer May Spell the End To China Trade.
The idea of de-coupling (that China can grow without the U.S.) is just plain false says Steve Cortes, Veracruz CEO. My research suggests that China’s growth is unsustainable without the American consumer. And the US consumer is badly wounded. Subsequently, I think the bullish pro-China story is ending.
How do you trade it?
I also think the dollar is finally stabilizing, Cortes adds. In other words I expect it to get stronger against other currencies. If you agree with my thesis you might want to short iShares FTSE/Xinhua China 25 Index [FXI
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] and buy the SPDR Turst [SPY
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] against it.
I also like Humana [HUM
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] in healthcare as well as Wal-Mart [WMT
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] and Costco [COST
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] in basic retail.
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Trader disclosure: On May 27, 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 (INTC), (DIS), (MSFT), (EMC), (WMT); Adami Owns (C), (GS), (INTC), (MSFT), (AGU), (BTU), (NUE); Najarian Owns (AAPL), (BHI), (BUD), (TSO), (XLF), (HPQ) ; Najarian Owns (BAC) Puts; Najarian Owns (JNPR) Calls; Finerman Owns (GS); Finerman's Firm And Finerman Own (FLS), (HD); Finerman's Firm Owns (MSFT), (SUN), (TSO), (VLO), (AAPL); Finerman's Firm Owns SPX Index Puts; Finerman's Firm Owns (C) And (C) Leaps, Finerman Owns (C); Finerman's Firm Is Short (IYR), (IJR), (MDY), (IWM), (SPY)
Veracruz LLC Is Long USD vs. GBP; Veracruz LLC Is Short (FXI), (FNM), (XHB)
Data is a real-time snapshot *Data is delayed at least 15 minutes