BATTLE THE BEAR
The Dow and broader stock market finished higher on Thursday, propelled by optimism about a major deal in the chemicals sector and comments from Ben Bernanke who said the government is focused on stabilizing the financial system.
The Dow was up because of Alcoa , says Pete Najarian. That’s the real story.
Alcoa stands to benefit as China's top 20 aluminum producers cut output by up to 10 percent as they struggle with power supply shortages and higher costs.
Also GM moved the market, exclaims Jeff Macke. CEO Rick Wagoner tried to quell investors by saying he has no plans to cut anymore of his company’s brands, but his remarks dragged down his stock.
STILL NO BOTTOM FOR BANKS.
Pimco, the world's biggest bond fund, said Thursday that it continues to trade normally with Lehman . Rumors that it had pulled business away from the investment bank clobbered Lehman's shares.
I’d buy Lehman with a tight stop, says Guy Adami. I think Lehman sees $21 before $16.
You can trade Lehman all day and maybe you can catch a rally, says Jeff Macke, but you’re not going to get a better upside catalyst than you got from Pimco and the stock didn’t even hiccup to the upside, I’d stay away.
In the financials, I’d keep an eye on Wachovia , adds Pete Najarian. I think their money flows are going give them trouble.
WILL FANNIE FAIL?
Meanwhile, inflammatory remarks from former St. Louis Federal Reserve President William Poole did little to set investors at ease. In an interview with Bloomberg he said, mortgage lenders Fannie Mae and Freddie Mac are "insolvent" and may need a U.S. government bailout.
Shares of the companies hit fresh lows on the comments even as a Freddie Mac spokeswoman told Reuters that the lender has "absolutely" enough capital.
“Stop talking trash about Freddie and Fannie, that’s not constructive,” says Former Federal Reserve Governor Wayne Angell on Fast Money.
“Freddie and Fannie are government sponsored enterprises,” he adds. “We need changes. We need regulators who can go out and say your capital isn’t what it should be and this is what you need to do to get it there.”
Angell doesn't advocate new legislation, at least not immediately. Instead he recommends "an educational effort for the Congress to understand it’s obligations by appropriating some money for some preferred stock.”
Of course the crisis rests firmly on troubles vexing the housing market. Angell's view on housing is a little somber.
“We are not in an inventory correction," he says. "This downturn is a longterm housing price adjustment downward and it’s going to take years to fix and we’re going to have slow real economic growth going forward. The second half is not going to be that much better than the first half. I’d put growth in 2009 at 1%.”
BIG DEAL BOOSTS COMMODITY STOCKS
Chemical stocks and energy stocks led Thursday’s rebound after Dow Chemical said it would buy rival Rohm for $15.3 billion. Warren Buffett is helping finance the takeover which is designed to broaden Dow’s product offerings in higher margin markets such as paints, coatings and electronic materials.
If things are so bad why would Dow get into this deal, muses Guy Adami. They’re paying a 75% premium. Clearly corporate America sees value out there.
Keep an eye on Eastman Chemical and Celanese, says Pete Najarian. They could also be takeover targets.
I own Huntsman , adds Karen Finerman.
$2 IN TWO MINUTES
A $5.60 jump in the price of oil kept the stock market gains in check. In the last 2 minutes of trading crude surged by $2. The surge was due in part to threats to production in Nigeria and Brazil as well an additional missile test by Iran.
The Nigerian militants remain militant, exclaims Jeff Macke. I bought the USO .
NASDAQ REBOUNDS FROM BEAR MARKET
Investors continued their love-hate relationship with tech shares on Wednesday. Cisco and Intel both rebounded paring the sector’s losses for the year.
I’ve been telling you about the wireless stocks, says Pete Najarian. The companies that are supplying the wireless buildout are poised to profit.
As tech stocks deteriorate I’m getting more interested in Cisco and Intel, says Karen Finerman. But I’d start small.
I’m with Finerman, adds Guy Adami.
REBATE BOOST JUST TEMPORARY
The nation's retailers on Thursday reported a better-than-expected June gain of 4.3 percent, with discounter Wal-Mart Stores Inc. accounting for the majority of the increase.
Despite the positive news shares of Wal-Mart , Target and many retailer moved lower largely due to the belief the spending surge was related to those stimulus checks. Analysts say the outlook for the back-to-school season remains tough, as consumers confront high gas and food prices, a slumping housing market and tighter credit.
I thought they would trade higher, says Karen Finerman. Target looks very compelling right now.
Costco and Wal-Mart, exclaims Jeff Macke. That’s all. Nothing else.
AFTER HOURS ACTION: WYNN
Casino resort operator Wynn says preliminary second-quarter data shows earnings at its Las Vegas casino fell 65%-72% while its profit in the Chinese gambling mecca of Macau almost doubled.
Casino stocks are exactly the kind of stock that you have to be horrified about, says Jeff Macke.
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Trader disclosure: On July 10, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Macke Owns (MSFT), (USO), (INTC), (WMT); Najarian Owns (AAPL), (CHK), (MAR), (NOK), (TSO), (XTO), (XLF); Najarian Owns (FNM) And (FNM) Puts; Najarian Owns (YHOO) Calls, (RIMM) Calls, (SLB) Calls, (CSCO) Calls; GE Is The Parent Company Of CNBC; NBC Universal Is The Parent Company Of CNBC; Finerman Owns (GS); Finerman's Firm Owns (DVA), (GE), (MSFT), (NOK), (SUN), (TSO), (VLO); Finerman's Firm And Finerman Own (C) And (C) Leaps; Finerman's Firm Owns (PLCE) Calls, (TGT) Calls, (HUN) Calls.; Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM); Finerman's Firm Is Long SPX Index Puts; Finerman's Firm Is Short (BIG)