ROUGH RIDE ON TUESDAY
Based on the action after hours it looks like a rough open on Tuesday. Apple led a string of earnings disappointments, which includes American Express and Merck.
Wall Street is in the thick of earnings season and by Friday ten Dow components and more than 150 members of S&P500 will report quarterly results.
Considering four of the nations five largest banks have now reported better-than-expected results it’s tempting to get into banks but don’t do it, counsels Joe Terranova. I think financials are going to be in trouble on Tuesday. Instead I’d trade some themes, he says. For example, what happened to American Express could happen to Capital One , so you might want to short it.
Doing nothing is a perfectly fine trading strategy right now, exclaims Jeff Macke. Hold some cash.
I’d stick with the fundamentals, says Karen Finerman, take a longer time horizon and put some kind of hedge against it.
AFTER HOURS ACTION: APPLE
Macintosh and iPod sales helped boost Apple's fiscal third-quarter earnings 31 percent, beating Wall Street's expectations Monday, but investors pummeled the stock after hours on soft guidance going forward.
The tech titan told investors to expect lower gross margins because they intend to price products more aggressively in the future.
I think the Street will really want to hear how they maintain profit with lower margins. I mean how's it not going to trickle down to the bottom line, muses Jeff Macke on Fast Money.
The dip could be an opportunity, counters Pete Najarian. I like this stock.
Apple has a reputation for conservative financial forecasts, and the soft guidance left some analysts including Pacific Crest Securities' Andrew Hargreaves sure that the company was playing an old game.
"Their outlooks aren't based in reality," he said. "I think it is them doing what they do, which is guiding extremely conservatively and then beating their own numbers."
Also, Steve Jobs, Apple's chief executive, did not join the conference call with investors prompting an analyst to inquire about his health. Jobs has survived pancreatic cancer." He has no plan to leave Apple," Chief Financial Officer Peter Oppenheimer responded. "Steve's health is a private matter."
He's never on the conference call, according to CNBC Silicon Valley Bureau Chief Jim Goldman. It's always the CFO.
> For complete coverage of Apple earnings click here
AFTER HOURS ACTION: TEXAS INSTRUMENTS
Texas Instruments first-quarter profit fell 4 percent, missing Wall Street estimates. The company said sales of cell phone chips continued to fall.
Their weakness was in wireless, says a surprised Pete Najarian. That suggests investors need to be stock specific.
In wireless their competitors; Qualcomm ,Broadcom and Altera are all worth the look.
> For complete coverage of Texas Instruments earnings click here
AFTER HOURS ACTION: AMERICAN EXPRESS
American Express posted earnings well below forecasts, sending its stock down sharply in after-hours trading.
The fourth-largest U.S. credit card issuer saw its profit fall 38 percent as it set aside more money to cover credit losses.
The company said it was no longer on track to boost earnings per share by 4 percent to 6 percent this year because the U.S. economy has slowed, particularly in June.
It’s not a surprise that their credit losses continued to expand, says Karen Finerman. It’s the magnitude. And I don't like the guidance but it's a world class franchise and if it drops to $35, I'd think about buying.
> For complete coverage of American Express earnings click here
AFTER HOURS ACTION: MERCK / SCHERING-PLOUG
Merck and Schering-Plough's shares fell after hours largely due to its cholesterol fighter Vytorin which failed to meet the main goal of improving cardiovascular outcomes in a closely watched heart study.
The two drugmakers had delayed the release of their quarterly earnings so investors could first learn the study's outcome.
> For complete coverage of Merck earnings click here
> For complete coverage of Schering-Plough earnings click here
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Trader disclosure: On July 21, 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), (HAS), (ATVID), (GS), (DIS); Najarian Owns (AMLN), (TSO); Najarian Owns (AAPL) And (AAPL) Puts; Najarian Owns (FHN) Puts; Najarian Owns (MRK) Calls, (YHOO) Calls, (CSCO) Calls; Finerman Owns (GS); Finerman's Firm And Finerman Own (C) And (C) Leaps; Finerman's Firm And Finerman Own (PDE); Finerman's Firm Owns (GE), (MRK), (MSFT), (PPH), (PFE), (SUN), (TSO), (VLO), (AXP); Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY)
Terranova Owns (RIMM), (GOOG), (YHOO), (INTC), (VLO), (IYT), (CME), (BNI), (FCX), (XLF), (SU); Terranova Is Long Crude Oil Sept. $154 Call; Terranova Is Short Crude Oil Sept. $130 Call; Terranova Is Short Crude Oil Sept. $130 Put; Terranova Is Chief Alternatives Strategist Of Phoenix Investment Partners, Ltd.,Terranova Is Co-Portfolio Manager Of The Phoenix Diversifier PHOLIO
Phoenix Investment Partners Owns More Than 1% Of (DBV), (RWX(, (LNET), (EXR), (SKT), (DLR), (IGE), (ARE), DBC), (ABD), (OFC), (CLB), (BLV), (CNTY), (FL), (HPC), (PSPT), (ESS), (OIIM), (BIG), (ENG), (PFD), (DRH)
Phoenix Diversifier PHOLIO Owns (IGE), (DBC), (DBV)
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