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The Dow [.DJIA Loading... ()
] suffered a triple digit loss on Wednesday after a bigger-than-expected drop in crude oil inventories pushed oil prices sharply higher, stoking fears about inflation and the effect on consumers.Sentiment soured further on fears of more trouble in the financial sector. The Financial Times said on Wednesday that Lehman [LEH
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] may look to raise more capital, sending the shares of the investment bank down sharply. A spokesman for Lehman declined to comment. Lehman's stock has lost a total of 28 percent in four straight days of losses.
Meanwhile a Merrill Lynch analyst reversed his “Buy” call on Lehman only 7 days later.
The turnaround is very interesting to me, muses Karen Finerman. I wonder if the call is based on something that’s also happening at Merrill.
I hate the financials, exclaims Jeff Macke. Get out!
The put buying in Lehman and the XLF exploded on Wednesday, adds Pete Najarian. The financials have a broken wheel and there’s no need to buy this train.
On a related note, according to CNBC's David Faber, speculation of a Goldman [GS
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] writedown is “highly” improbable.
I second that, adds Guy Adami. As far as I'm concerned Goldman is best of breed.
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BUD BID CLOSE?
Brewer Anheuser-Busch [BUD
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] confirmed it received an unsolicited takeover offer from European beer maker InBev worth about $46.9 billion. InBev is offering $65 per share for the St. Louis-based beer maker.
This is a bear hug, explains Karen Finerman. If they say no I’d be curious to see if ImBev goes hostile. And remember large deals like this take time.
I think Anheuser will have a tough time saying “no” to the offer, says Jeff Macke. But deal or no, I like Molson-Coors [TAP
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] better.
Or look at The Boston Beer Company [SAM
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] for a trade, counsels Guy Adami
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WHAT'S WRONG WITH OIL-PROOF TECH? ... BUY INTEL, CHIPS ON DIP?
The Semiconductor Industry Association cut its 2008 semiconductor sales growth forecast Wednesday, citing ongoing pricing pressure in memory chips, and in DRAM memory chips in particular. DRAM memory chips store information in personal computers and other devices.
Meanwhile, Intel [INTC
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] and other chip makers led the market lower on Wednesday. Tech had been rallying because it was thought to be immune to oil.
After selling off, is now the time to buy?
“On the dip I think it’s a good time to look at Marvell Technologies [MRVL
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] says Friedman Billings chip analyst Craig Berger.. at the current valuations I think it’s an opportunity."
What's your outlook, long-term?
“Chip consumption is driven about 80% from international regions,” he explains. “There’s a lot of emerging market unit demand… from people who have never had electronic devices. I’m bullish.”
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TOPPING THE TAPE: ENERGY STOCKS
Energy names were the only major sector working on Wednesday as oil jumped $5 To $136.38.
The volatility in crude looks crazy to me, says Guy Adami. If you want to trade energy trade nat gas he counsels. Look at XTO Energy [XTO
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] and Apache [APA
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].
Amen brother, exclaims Pete Najarian.
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OPTIONS MARKET GIVING HINTS...
AK Steel [AKS
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], Honeywell [HON
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], and D.R. Horton [DHI
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] all experienced increased options trading on Wednesday.
Options action in the July 70 calls of AKS suggest to me that this stock could go higher, reveals Pete Najarian. Also a large volume of June 55 calls in Honeywell suggest this stock could also go higher.
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JEFF MACKE'S SOAP BOX.
As Vale [RIO
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] prepares to sell $15 billion in shares, Jeff Macke can’t help but wonder if they’re doing it because they think investors are willing to pay more for the stock than the company is worth.
Here’s Macke’s case:
Blackstone: Down 50.5% from day one close
Wynn: Down 41% from offering at $170
Genco: Down 25% since closing offering at the end of May
When people who own a lot of stock start selling don’t play along side, says Macke. Dump it, instead!
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WEAK DOLLAR TRADE BACK ON?
The dollar weakened after two days of gains leaving investors to speculate whether the recent run is sustainable.
Meanwhile, one day after Fed Chief Ben Bernanke suggested that rates could soon go higher, Federal Reserve Vice Chairman Donald Kohn hinted that the central bank is inclined to leave rates steady despite rising inflation worries among US consumers.
In prepared remarks to the Boston Fed's inflation conference on Cape Cod, Kohn said that when the economy is hit with an oil price shock as it has been this year, the "appropriate" Fed policy will permit -- temporarily -- both higher inflation and higher unemployment.
I don’t think you can be long the dollar until we have a consistent dollar policy, says Jeff Macke.
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Trader disclosure: On June 11, 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 (WMT), (MSFT), (INTC), (DIS); Adami Owns (AGU), (BTU), (C), (NUE), (GS), (INTC), (MSFT); Najarian Owns (AAPL), (BHI), (TSO), (ANR), (BUD), (XLF), (HPQ) (CHK); Najarian Owns (NUE) Calls; Najarian Owns (DHI) Puts, (LEH) Puts; Finerman Owns (GS); Finerman's Firm Owns SPX Index Puts; Finerman's Firm And Finerman Own (C) And (C) Leaps; Finerman's Firm Owns (AAPL), (MSFT), (SUN), (TSO), (VLO); Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM), (BIG); GE Is The Parent Company Of CNBC
FBRC Is A Market Maker In (ONNN), (INTC), (BRCM), (MRVL), (ATML), (LSI), (SLAB), (MSCC)
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