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Hanging On By A Thread

Monday, 23 Jun 2008 | 5:54 PM ET

HANGING ON BY A THREAD

The Dowand the S&P 500ended little changed on Monday as renewed concerns about the outlook for financial shares offset gains in energy stocks and news of a $4.4 billion takeover in the agricultural sector.

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GOLDMAN GETS IT WRONG

Goldman Sachs urged U.S. stock investors to "underweight" the nation's financial and consumer discretionary sectors, admitting that it was mistaken when it upgraded both sectors on May 5th, just seven weeks earlier.

The downgrades sparked selling in stocks in both sectors, as investors feared that weakening consumer demand and deterioration in the credit markets would weigh on profitability.

I don’t think Goldman was really talking to most investors, explains Karen Finerman. They were really talking about fine tuning a very large portfolio.

Meanwhile, shares of Merrill Lynch fell 3.9 percent to $34.54, after Banc of America Securities said it expects the investment bank to write down $3.5 billion in the second quarter.

Also the Street is bracing for another round of lay-offs in the financials. Citigroup , is expected to cut up to 6,500 investment banking jobs while Goldmansaid it plans to trim 10% of the division that handles its mergers and acquisitions.

Options action suggests to me the financials are going lower yet, adds Pete Najarian. Don’t bottom pick!

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OIL DEFIES SAUDI PLEDGE

Saudi Arabia's promise to pump more oil failed to win over a skeptical market. Oil bounced off lows to stand above $137 a barrel in choppy trading on Monday, spurred by tension between Israel and Iran.

The impact should ultimately be decidedly bearish, explains to David Kirsch, PFC Energy's Manager who’s firm attended the week-end summit. Saudi Arabia has committed to 9.7 million barrels a day of output for the remainder of the year, despite having difficulties in finding customers for all of its current production of about 9.5 million barrels a day.

I’d take a wait and see approach, counters Guy Adami. If you want to trade oil, Deutsche Bank says oil services is where you want to be. Look at Halliburtonand Schlumberger .

I’ve noticed a lot of insider buying in the refiners, says Karen Finerman. There must be a perception that these stocks are cheap.

I’m not that impressed with that insider buying, counters Pete Najarian. I’m much more impressed with the natural gas stocks. If you want to play insider buying look at SandRidgeor Chesapeake in the nat gas space. I also like BJ Services .

Remember, the trend is your friend, exclaims Jeff Macke.

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UPS POINTS TO LOWER OPEN

United Parcel Service warned that its second-quarter earnings would be below expectations due to a sluggish U.S. economy and soaring fuel costs.

In a statement, UPS said U.S. package volume had been lower than expected, while demand for higher-priced air delivery services had seen a particular drop.

The announcement came less than a week after rival package delivery company FedEx issued a weak fiscal 2009 forecast and posted a quarterly loss, also blaming rising fuel prices and an ailing economy.

I’m surprised they waited to release this info, says Guy Adami. It’s just not good. If you see capitulation in this stock then I think you can play it for a trade.

I think UPS as well as FedEx is caught in a malaise, adds Jeff Macke. There’s not much of a trade here.

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GM LOWEST SINCE 1975

Much like any car, General Motors is having a much easier time going downhill than back up. On Monday the stock closed below $13, that’s a level it had not seen since January 2, 1975.

It’s horrific, says Jeff Macke, there’s no bottom in sight.

Maybe we’re getting near the bottom, counters Guy Adami, but we probably haven’t seen volume capitulation yet.

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A SIGN OF CORN TOP?

Shares of Corn Products Internationalhit an all-time high after the opening bell on Monday after agribusiness firm Bunge said it was buying the company for about $4.4 billion.

I don’t know what to make of it, says Karen Finerman. The thing that’s most interesting is that it’s a stock for stock transaction.

You might want to look at Deere , adds Guy Adami.

Find out how Pete Najarian recommends trading the news in “Reaping Winners”

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BIGGEST GOLD DROP IN 2 WEEKS

Gold closed almost $17 lower giving back part of last week’s gains.

I think the next move in gold is down to $820, says Guy Adami.

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OPTIONS ACTION : DEFENSE STOCKS

Pete Najarian is seeing unusual options activity in defense company L-3 Communications.

Word on the Street
The Fast Money guys take a look at today's top business stories.

The volume of call buying in this stock suggests to me that it could soon bounce higher, says Najarian.
















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Trader disclosure: On June 23, 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 (HAS), (WMT), (MSFT), (INTC); Najarian Owns (AAPL), (TSO), (XLF), (CHK); Najarian Owns (LLL) Calls, (SLB) Calls, (SD) Calls; Najarian Owns (MER) Puts; Adami Owns (NUE), (BTU), (C), (AGU), (GS), (INTC), (MSFT); Finerman Owns (GS); Finerman's Firm Owns (CYBX), (MO), (MSFT), (NYX), (PM), (SBUX), (TSO), (VLO); Finerman's Firm Owns SPX Index Puts; Finerman's Firm And Finerman Own (C) And (C) Leaps; Finerman's Firm Is Short (BIG), (IYR), (IJR), (MDY), (IWM), (SPY)

  Price   Change %Change
DJIA
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S&P 500
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BG
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C
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CHK
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DE
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FDX
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GM
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GS
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HAL
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LLL
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SD
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SLB
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UPS
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  • Chief Market Strategist for Virtus Investment Partners & CNBC Contributor

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