The Dow closed with triple digit gains on Tuesday largely due to a $3 slide in the price of crude oil and positive sentiment created by bank earnings.
BANKS TAKE-OFF IN FINAL HOUR
Wachovia popped Tuesday despite the fact it reported a surprisingly large second-quarter loss. The nation's fourth-largest bank by assets said it lost $8.86 billion; it also intends to slash its dividend and eliminate 10,750 positions.
In fact the entire banking sector moved higher after KeyCorp posted a smaller-than-expected loss and Fifth-Third impressed the Street by saying except for one time charges they would have earned 7 cents per share.
We haven’t seen the XLF take a breather at all, says Karen Finerman. This move looks like it’s too much too fast. Also I think political winds could change with Fannie and Freddie so I think you could see some meaningful trouble ahead. I wouldn’t be surprised to see a 5% pull back.
And Finerman puts her money where her mouth is. In the last few minutes of the day I shorted BB&T Corp, she tells the Fast Money traders.
I also think you have to be careful of the banks, adds Joe Terranova. The trend in the XLF chart looks bearish to me. Downtrends end with a consolidation period not an uptrend.
I think we’re more than half-way through the write-downs, adds Pete Najarian. However, I’m not sure how banks will make profits going forward.
OIL DROPS $3
Oil prices fell to a six-week low on Tuesday amid concerns over sliding U.S. energy demand and expectations that a tropical storm pushing through the Gulf of Mexico would spare most offshore oil production.
The losses extend a decline from the July 11 peak above $147 a barrel that has marked the steepest price fall in dollar terms in oil's history -- leading some analysts to question how soon the market will resume its six-year rally.
All of the commodity names got hit by the slide in oil, says Pete Najarian. When that happened commodity investors went into banks. It’s a rotation out of commodities into financials.
I can’t stress enough that you need to be careful in this space, adds Joe Terranova who's an oil trader. I don’t agree that oil rolled over and I don’t think the energy run is over. Expirations dragged down the price of crude, nothing more.
> Has Commodity Bubble Burst?
AFTER HOURS ACTION: WASHINGTON MUTUAL
Washington Mutual reported a larger-than-expected loss and a steep decline in revenue, but the bank's stock rallied in after-hours trading on its comment that it has sufficient capital to "manage through this challenging period."
I’m unclear if they want to get infront of their bad credit, says Karen Finerman. If they do, this stock might be worth a look.
I don't know about that. This is a stock that’s already made a pretty big move, counters Pete Najarian.
AFTER HOURS ACTION: E*TRADE
E-Trade dropped about 13% after hours when the brokerage firm said Tuesday it swung to a loss during the second quarter due to a sharp increase in loan-loss provisions.
Provisions for losses were primarily tied to increasing charge-offs in E-Trade's home equity portfolio. Charge-offs are loans that are written off as not being repaid.
I think this company could start to make gains in the future, says Pete Najarian. Take a look.
> For complete coverage of E*Trade earnings click here
AFTER HOURS ACTION: YAHOO
Yahoosays its second-quarter profit dropped 18 percent, marking the latest in a long stretch of disappointing results for the Internet company.
The less than stellar performance intensifies the pressure on Yahoo's management to find a way to lift the Internet company's sagging stock price after rebuffing a $47.5 billion takeover offer from Microsoft in May.
“Ultimately Microsoft needs Yahoo," says Piper Jaffray analyst Gene Munster on Fast Money. “And it looks like the board is positioning Yahoo! for a sale.”
If you’re wondering Munster is bullish on Yahoo! shares. “Since we believe it’s a takeover target we recommend buying Yahoo as a take-out play.”
> For complete coverage of Yahoo! earnings click here
Apple and Texas Instruments dragged down the Nasdaq as much as 1% intra-day, after their disappointing outlooks fanned fears about a weaker economy going forward. However by the end of trading Apple recovered much of its losses.
In their earnings report Apple revealed impressive sales numbers. iPod unit sales jumped 12 percent, a strong showing despite last year's launch of the iPhone, which melds iPod features with those of a smart phone. Some analysts had wondered whether iPod sales would lag as consumers opted for fancier, but pricier, iPhones.
The company shipped 717,000 iPhones in the quarter and reiterated its goal to sell 10 million by the end of the fiscal year, including the cheaper, faster iPhone 3G that reached stores in 22 countries in early July.
As you probably know by now the new iPhones sell at a much lower price point.
The margins are coming down, admits Pete Najarian, and that could impact the bottom line. But the cascading effect of the iPhone should provide much bigger tailwinds for the Mac. I'm bullish.
“I think the stock is going to go up,” adds Gene Munster.
Bouldersah, exclaims Jeff Macke. I'd take the other side of that trade!
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Trader disclosure: On July 22, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Najarian Owns (AAPL), (AMLN), (C), (CHK), (ETFC), (TSO), (ICO): Najarian Owns (CSCO) Calls, (MRK) Calls, (YHOO) Calls, (HUN) Calls; Macke Owns (GS), (WMT), (MSFT): Finerman Owns (GS); Finerman's Firm Owns (MSFT), (SUN), (TSO), (VLO), (M); Finerman's Firm And Finerman Own (C) And (C) Leaps; Finerman's Firm Is Short (BBT), (WB), (IYR), (IJR), (IWM), (SPY), (MDY); Finerman's Firm Owns (HUN) Calls: Terranova Owns (BNI), (SA), (VLO), (RIMM), (CME), (FCX), (GOOG), (INTC), (IYT), (XLF), (SU), (YHOO); Terranova Is Long September Crude Oil $154 Calls; Terranova Is Short September Crude Oil $130 Puts; Terranova Is Short September Crude Oil $130 Calls;
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)Charles Schwab Is A Sponsor Of "Fast Money"
Piper Jaffray Is A Market Maker In (AAPL), (GOOG), (YHOO)