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Stocks closed lower again on Wednesday with the Dow Jones Industrial Average [.DJIA
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] posting its second straight triple-digit decline. Renewed concerns about the financial sector and a warning from FedEx about its fiscal 2009 profits pushed stocks lower from the opening bell. For a time, the Dow traded below the 12,000 mark for the first time since mid-March.
Turn that frown upside down, says Jeff Macke. The market action was better than a poke in the eye with a big stick. But this market remains one to be sold not bought.
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MORGAN STANLEY FIGHTS HIGHER
Morgan Stanley [MS
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]on Wednesday said quarterly earnings dropped by more than 50 percent on trading losses and a slowdown in investment banking, despite $1.43 billion of pretax gains from asset sales. The results beat expectations, but still left concerns about the bank's ability to generate profit growth in the future.
I like Morgan Stanley with a stop at $37.50 says Guy Adami. I’m looking for 10% on the upside.
On Wednesday I bought the Financial Select Sector ETF [XLF
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], reveals Joe Terranova. I think you can dip your toe.
I think the XLF is still broken, counters Pete Najarian.
If you want to play financials make sure you go into the trade with some kind of exit strategy, exclaims Jeff Macke.
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OPTIONS ACTION: YOUR BANK IS IN TROUBLE
Pete Najarian has spotted unusual options activity in Regions Financial Corp [RF
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].
On Wednesday options traders were buying July 10-puts Najarian adds. It seems to me the bottom is not in regional banks, yet.
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WHEN WILL BANKS BOTTOM?
Financials may look cheap but they’re still not for the faint of heart. Can the market rebound without the banks?
For insights we turn to David Kelly, JPMorgan Funds chief market strategist.
Investors need to realize the risk is in the bubble, explains Kelly. This has been the decade of the bubble. We’ve had a tech bubble, real estate bubble, fixed income bubble and now a commodity bubble. Eventually the bubble will break and energy prices will come down. And when that happens that will be very psotive for the US economy and the stock market.
How would you trade?
I think you look at valuation rather than momentum. Technology, healthcare and even financials stocks look good to me, says Kelly. Maybe there will be a lot of volatility in the short run but I like them for valuations in the long run.
And I’d steer clear of consumer names. I think we’re near the last good ride from the consumer.
Is there any specific area of technology you like?
I’d look at broadband and broadband capacity. We’re growing video usage and that needs more broadband capacity, he says.
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AFTER HOURS ACTION: COVENTRY HEALTH
Coventry Health Care [CVH
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]reduced its second-quarter and full-year earnings forecasts after costs came in higher than expected in April and May.
Despite a positive close UnitedHealth [UNH
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] and other HMO’s were beaten down senseless on the Coventry news, explains Dylan Ratigan.
When entire sectors are beaten senseless I say why would you want to get involved, exclaims Jeff Macke. Don’t fight this tape.
That’s exactly right, adds Pete Najarian.
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FEDEX MAILS IT IN
There are some things that FedEx [FDX
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]just can’t deliver. On Wednesday it was a positive outlook on the economy. The package delivery company forecast a weak fiscal 2009 after posting a quarterly loss it blamed on rising fuel prices, an ailing U.S. economy and a previously announced write-down.
I think $80 is support for this stock, says Guy Adami. You could see a relief rally.
Or look at the iShares Dow Jones Transport ETF [FDX
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] – 9% of its holding is in FedEX. That might be a safer play, adds Joe Terranova.
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OIL KNOWS ONLY ONE DIRECTION
Oil prices rebounded from earlier losses on reports that Nigerian oil workers are about to strike and as investors focused on a surprise decline in gasoline inventories last week.
On Friday the July contract expires, and I’m looking for oil to approach $140 reveals Joe Terranova. But the energy play for me is nat gas.
Amen brother, says Guy Adami. Look at XTO Energy [XTO
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].
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AFTER HOURS ACTION: RAILROADS
Extensive flooding in the Midwest has disrupted railroad networks and delayed coal shipments at a time when tight supplies already have contributed to higher prices for coal and electricity.
Burlington Northern [BNI
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] , Union Pacific [UNP
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] and other railraods say they expect to have to make repairs once the flooding recedes.
This is the pullback you’ve been waiting for, says Pete Najarian. I like BNI as well as CSX Corp.[CSX
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].
I love BNI as a company but the stock went from $78 to where it is now, adds Guy Adami. I think you could see panic selling.
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PFIZER BUYING TIME
Shares of Pfizer [PFE
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]bounced Wednesday after the drug company announced a patent settlement with India's Ranbaxy's Labs over the cholesterol drug Lipitor. Under the deal Ranabaxy can begin selling a generic form of Lipitor by late 2011, about five months later than Wall Street had expected.
Pfizer is a company on the stretcher that’s reaching for the resuscitator, says Pete Najarian. They need to do something with their pipelines. If you want to play the space look at Sanofi Aventis [SNY
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]and Myriad [MYGN
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] instead.
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TOPPING THE TAPE: YRC
YRC Worldwide [YRCW
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] North America’s largest trucker appears to be rolling along nicely. Shares jumped 8% on a higher forecast . CEO Bill Zollars said that oil prices are the big worry but the company is gaining momentum in this difficult economy.
I see consolidation coming to this space, says Joe Terranova.
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Trader disclosure: On June 18, 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), (MSFT), (WMT); Pete Najarian Owns (AAPL), (BHI), (ENER), (MS), (TSO), (XLF), (XTO), (CHK), (HPQ), (MYGN); Pete Najarian Owns (RF) Puts; Adami Owns (AGU), (BTU), (C), (NUE), (GS), (INTC), (MSFT); Terranova Owns (XLF), (YHOO), (LUV), (FXC); Terranova Is Long Dec 2008 Crude Oil; Terranova Is Short Dec 2009 Crude Oil
Terranova is chief alternatives strategist at Phoenix Investment Partners; Phoenix Investment Partners Ltd. Owns (RWX), (DBC), (DBV), (IGE), (AAI), (ALK), (AMR,) (APA), BP plc, British Airways plc, (CHK), (CVX), (COP), (CAL), (DAL), ENI SPA, (XOM), Gazprom, (HA), (HES), (HOC), (HSE), (JBLU), Lukoil, (MRO), (MUR), (OXY), Petrobras Intl Fin, Petro-Canada, (PBR), Petroleos De Venezuela, (QAN), (RJET), Royal Dutch Shell plc A Shares, (SKYW), (LUV,) (SU), (TSO), Texaco Capital, Total SA, (UAUA), (LCC), (VLO)
Data is a real-time snapshot *Data is delayed at least 15 minutes