DOW FALLS MORE THAN 200 PTS.
The Dow tumbled on Monday as more credit and housing market turmoil battered financial shares and a mixed bag of quarterly results added to uncertainty in corporate profits.
We’re in a bear market folks, reminds Guy Adami. We’ve been telling you that for some time.
BOTTOM FALLS OUT OF BANKS
Investors dumped their bank shares on Monday following word that federal regulators had seized both First National Bank of Nevada and First Heritage Bank of California.
Meanwhile a Merrill analyst said Lehman may post a third-quarter loss and face a round of fresh write-downs on its residential mortgage portfolio. "It's all about financials right now,” says Paul Nolte, director of investments at Hinsdale Associates. “We saw a couple of small banks go 'belly up' over the weekend. Now people are wondering what's going to happen next and when."
Shares of mortgage finance companies Fannie Mae and Freddie Mac also plunged, reversing gains seen after Congress, over the weekend, approved a rescue plan for the U.S. housing market
Now the pain is back, says Pete Najarian and investors are looking at these stocks much more closely.
There was no reason for investors to keep buying financials, says Jeff Macke. There was no technical reason nor was there a fundamental reason.
The run up in the banks was so strong and so dramatic over the past 10 days that I don’t think this is a pull back to buy, counsels Karen Finerman. (In other words there’s more pain ahead.) I ask myself how much further can things go down, she adds. But one day I'm confident that it will end.
VERIZON, APPLE LEAD TECH SLIDE
On the Nasdaq, shares of iPod and iPhone maker Apple were the biggest drag, while Verizon also created downward pressure after the telecom reported revenue that was slightly shy of expectations.
I like AT&T, says Pete Najarian on the coat tails of the iPhone.
AT&T is the place where love goes to die, counters Jeff Macke. Just go to an AT&T store and look at the frustrated people who can’t make their iPhone work.
Corning dominates the space and they’re on a 52-week low, says Guy Adami. Look at this stock; I think they’re doing everything right.
OIL REBOUND WEIGHS ON STOCKS
Oil climbed on Monday after militant attacks slashed Nigerian oil production and Iran stirred geopolitical tensions by suggesting it was rapidly expanding its nuclear program.
The gains were limited somewhat by fresh evidence that high prices were shrinking demand in the United States -- a trend that has contributed to a record sell-off in oil prices since the mid-July peak.
If you want to play commodities I’d look at the coal names such as Walter Industries and Bucyrus , says Pete Najarian.
Arch Coal is another one to watch, adds Guy Adami.
I’m not excited about coal, counters Jeff Macke. They’re just not as negative as ag and oil.
AFTER HOURS ACTION: AMGEN
Amgen reported a far better-than-expected quarterly profit as sales of its anemia drugs, hurt by safety concerns and reimbursement restrictions, declined less than expected, and the company raised its 2008 forecast.
In the space, I like Johnson & Johnson , says Guy Adami and I think it has further upside.
WHY ISN'T SIRIUS SOARING?
Federal regulators have formally approved the merger of the nation’s only two satellite radio operators in a deal closely watched by Washington and Wall Street.
I love the idea of these companies, says Jeff Macke, but the FCC absolutely gutted them. I wouldn’t by a stock where the future contains a dilution in shares that I can’t understand.
ALCOA BUCKS THE BEAR
Alcoa shares closed in the black after announcing that Highfields Capital intends to raise its stake in company to 8% from 2%.
It’s worth noting that Alcoa was the only up-name in the Dow, says Dylan Ratigan.
I think Alcoa could be a takeover target, muses Guy Adami.
OPTIONS ACTION: SILVER WHEATON
Pete Najarian is seeing unusual options activity in miner Silver Wheaton .
Options action in this name suggests the stock could move higher in September, explains Pete.
BARBARIANS RING THE DOOR BELL
Private equity firm Kohlberg Kravis Roberts & Co., which gained fame by taking RJ Reynolds private more than three decades ago and now controls hospital operator HCA and many other companies, said Sunday it will go public on the New York Stock Exchange
The new structure won't give KKR a boost of cash like a regular IPO, but will provide it with access to new markets to raise capital. A public listing would allow KKR to either issue new shares in a takeover bid of another company or to sell shares and raise cash.
The move has some investors asking themselves if this is the bottom in the financials.
“I don’t know if this marks a bottom,” says Jefferies analyst Daniel Fannon on Fast Money. “But if you look at the trends in the business for Blackstone, Fortress or KKR they have certainly changed pretty dramatically. I don’t think we can predict a rebound in these business overnight but it’s hard to think they can slowdown much more than they have.”
Fannon doesn’t cover KKR but he does cover Blackstone and Fortress . “I have an underperform on Blackstone and a hold in Fortress,” he explains.
A lot of the themes that work in those names should hold true in KKR,” he concludes.
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Trader disclosure: On July 28, 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), (DIS), (WMT), (ATVID), (MSFT); Adami Owns (BTU), (C), (AGU), (GS), (MSFT), (NUE); Finerman Owns (GS); Finerman's Firm Owns (MSFT), (SUN), (TSO), (VLO); Finerman's Firm And Finerman Own (C), (C) Leaps; Finerman's Firm Is Short (BBT), (XLF), (IYR), (IJR), (MDY), (IWM), (SPY); Finerman's Firm And Finerman Own (C), (C) Leaps; Najarian Owns (CSCO) Calls, (YHOO) Calls, (SKF) Calls, (WLT) Calls; Najarian Owns (TSO) And Is Short (TSO) Calls; Najarian Owns (AAPL) And (AAPL) Puts; Najarian Owns (XLF) Puts
Jefferies And/Or Affiliates Received Non-Investment Banking, Securities Related Compensation For Client Services Provided To (FIG) In Past 12 Mos.
Fannon Owns (KFN)