DOW FALLS BELOW 12,000
The Dow Jones Industrial Average closed sharply lower Friday, registering its third triple-digit loss in four sessions. Investors had plenty of reasons to sell, including a downgrade of automakers, a reduction in earnings estimates for regional banks from Merrill Lynch, and a rebound in oil prices.
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BANKS FALL TO NEW CREDIT-CRUNCH LOW
Rumors of an impending profit-warning and further writedowns sparked a selloff of Merrill Lynchstock as well as other financial stocks Friday. Merrill denies the rumor.
Meanwhile Merrill analyst Edward Najarian (no relation to Pete or Jon) said Friday that regional banks appear to be in capitulation (that’s a point where stocks are oversold) suggesting we could be near a bottom.
This isn’t capitulation says Guy Adami. It’s coming but not yet.
I thought it looked like capitulation on Thursday, says Quint Tatro. But it probably isn’t.
The July put trading has exploded on the downside, says Pete Najarin. I think all you can do in the financials is own puts.
They don’t give you medals for calling the bottom on these, adds Jeff Macke. Just move on!
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$140 OIL NEXT WEEK
Oil rebounded about $3 a barrel on Friday in response to views now gaining ground that a fuel price increase in China may actually boost demand. China’s drivers have faced long lines and rationing as refiners cut back on production to limit hefty losses made by selling discounted fuel.
This is yin to the financials yang, says Jeff Macke. Get long what’s working with a tight stop and hang on.
If you want to play energy look at nat gas, adds Pete Najarian, that is the sector to focus on. I like SandRidge, Chesapeake and Petrohawk.
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A MEETING OF THE MINDS
The world’s largest oil producers and consumers will meet Sunday in Saudi Arabia to discuss escalating oil prices. What impact, if any, will the meeting have on Wall Street?
Month to month the oil market is flat, says Joe Terranova, chief alternatives strategist with Phoenix Investment Partners. I think the chatter out of this weekend will be less about supply and more about consequences. In other words are speculators to blame.
As a result money will probably go out of oil futures but park itself in integrated oil because the theme doesn’t change. The world needs energy.
How would you trade?
I’d get out of oil futures or the United States Oil Fund and get into integrated oil, counsels Terranova. Personally, I own SunCor Energy (SU).
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GOLD BACK TO $1000
Gold ended slightly lower on profit taking despite a recovery in crude oil prices. The metal eased Friday after Thursday's price rally failed to take gold through its previous high of $908.70, hit on June 9.
I don’t see why gold would go higher anymore, says Guy Adami. If you buy, you’re buying on hope.
I agree that it makes no sense to see gold going higher, adds Quint Tatro. But the trend is your friend, so play “what is”.
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YAHOO: A REORGANIZATION!
A number of senior executives may be leaving Yahoo!as the company looks to improve earnings. President Sue Decker is also considering a reorganization that would centralize Yahoo mail, search and homepage divisions into a global product organization, the Wall Street Journal reported, quoting people familiar with the matter.
This absolutely does not make me want to buy this stock, exclaims Jeff Macke.
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CONSUMER STOCKS WRECKED
This week consumer stocks from Wal-Martto Disneyweighed down the market as high gas prices curbed discretionary spending.
Retail is a ridiculously hard place to play right now, says Jeff Macke.
I think you can look at Mastercard if it drops a little lower, adds Guy Adami.
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SUN STOCKS SHINE ON WEEK
Shares of Evergreen Solar shot up Thursday after the solar panel producer inked two long-term sales contracts valued at about $600 million.
I think ESLR is a buy at current levels, says Quint Tatro. As well as Ascent Solar and Energy Conversion Devices
This guy is smart, says Pete Najarian. Hewlett Packard, IBM, and Applied Materials seem to be getting into the space. That suggests the industry could become very profitable.
Sell the exuberance in Evergreen, counters Guy Adami. I think you’ll be able to buy it with a 10-handle.
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SCHOOL BREAKING OUT FOR THE SUMMER
Credit Suisse upgraded Apollo Groupto “Outperform” on Friday citing raised tuition costs. The move gave other stocks in the space a nice boost.
When the economy stinks people go back to school and get degrees, says Quint Tatro. I’m a buyer of DeVry and Apollo.
I also like Apollo, says Guy Adami.
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A WEEK OF BREAKTHROUGHS
Positive results from an experimental Alzheimer’s drug sent shares of Wyeth and Elan higher while GlaxoSmithKline received a bounce after their prostate drug Avodart received FDA approval.
Keep an eye on Myriad Genetics , says Pete Najarian, as well as Teva . I like their pipelines.
