August Begins With Slide
AUGUST BEGINS WITH SLIDE
The Dow closed lower on Friday after General Motors reported hefty losses and new data showed U.S. employers cut jobs for the seventh straight month.
GM POSTS $15.5 BLN LOSS... GM JULY SALES PLUNGE 27%
General Motors posted a 15.5 billion dollar loss on Friday; making the second quarter one of the worst quarters in the company’s nearly 100 year history.
They said the weakness was mostly due to lackluster sales in North America, labor expenses, and a massive restructuring plan aimed at preserving cash to weather a prolonged U.S. economic downturn.
Meanwhile, GM, Ford, Toyota and other automakers said Friday that their U.S. sales fell by double-digits in July as they struggled to keep up with consumers' growing demand for smaller, more fuel-efficient vehicles.
It just really highlights the problem, says Karen Finerman. No one wants the products GM sells.
No one here, counters Tim Seymour. But overseas it's another story. (He feels that GM cars are popular abraod as a symbol of American wealth.)
It’s time for a new CEO, adds a disgruntled Guy Adami. Rick Wagoner has been there for more than a decade. I’m waiting for a 100 million share day when the stock makes a new bottom. That’s when I’d buy GM but as a trade.
David Healy, an analyst with Burnham Securities is bullish long-term. He tells the Fast Money traders "with a $15 billion loss and the stock collapsing it’s hard to value shares."
"But at the end of the day I think GM will get through this. They will learn to make money on small cars and over a two to three year period the stock will give you a good reward. But you have to have the stomach for it."
IT’S ALL ABOUT JOBS
The U.S. unemployment rate hit its highest level in four years during July as employers cut non-farm jobs for a seventh straight month, though less severely than predicted, a Labor Department report showed.
Brian Gendreau, an investment strategist with ING Investment Management Americas in New York, described the monthly job losses as "painful" and consistent with a weak economy.
At the end of the day the market didn’t behave as badly as I would have thought, says Guy Adami. I find that "bad news seems to be bought in the financials and good news seems to be sold in the commodities stocks."
OIL ENDS 3-WEEK SLIDE
Oil prices turned around on Friday after Israel warned that Iran was on the verge of a breakthrough in its nuclear program, stirring concerns of a potential confrontation that could disrupt supply from the OPEC nation.
I don’t know if it’s a turn around in oil, says Guy Adami. I think it’s a bounce. However, it could be time to get into integrated names such as Exxon around $80.
I’m concerned about the refiners, adds Jeff Macke. Tesoro finds new reasons to make 52-week lows almost every day. Perhaps that's a reason to short this stock but there are much better trades out there than oil.
Economics across the globe suggest there’s real demand destruction, says Tim Seymour. I expect the overall trend in oil to be lower.
WALL STREET PAYING PIPER
Keeping up with the banking sectors is almost as complicated as following the plotlines of a soap opera.
On Friday, the sector made new gains after published reports suggested Lehman may be in talks with prospective buyers to sell about $30 billion in commercial mortgage assets and other hard-to-value securities.
I’m a little surprised by the broad bank rally, adds Finerman. I think it’s overdone to the upside and I’m short the Financial Select Sector SPDR.
Earlier in the week, shares of Merrill
soared after the investment bank announced a fresh set of write-downs. Investors tooK it to mean the bottom might be near.
Then on Friday, CNBC's Charlies Gasparino revealed that more information on Merrill could be available as soon as next week in an SEC filing.
I think for Merrill may be the worst is over, says Karen Finerman.
With Meredith Whitney warming up to Merrill, I too think it could have made a bottom, adds Guy Adami.
Meanwhile shares of Washington Mutual soared on Thursday after word hit the Street that Tosca, a $7 billion hedge fund firm run by former Tiger Management trader Martin Hughes held a 6% stake in the bank. Investors took that to mean WaMu might have bottomed and/or a management shake-up could be at hand.
Traders keep saying the bottom is in. I think a bottom is in financials, but not "the" bottom, says an aggravated Jeff Macke.
THE YAHOO'S MEET
Yahoo tried to soothe angry investors at its annual meeting on Friday, insisting it had been serious about talks to sell itself to Microsoft and that it had good growth prospects in the next three years.
Yahoo's board "called the shots" when discussing Microsoft's proposals, including a $47.5 billion buyout bid as well as attempts to buy Yahoo's Web search business, Chairman Roy Bostock said.
I can’t think of a compelling reaons to buy this stock and I’m a fairly imaginative fellow, says Jeff Macke.
BIZARRE WEEK FOR BIOTECH
What a week it’s been in the biotech space.
On Thursday investors scrambled for options on several pharmaceutical and biotechnology stocks, with many betting on future gains in the sector following news that Bristol-Myers offered to buy out the remaining stake in biotech partner ImClone .
News of the deal triggered a flurry of option activity in Amgen, Onyx Pharmaceuticals and Amylin, said option strategist Frederic Ruffy.
Meanwhile, negative news on the multiple sclerosis drug Tysabri sent shares of Elan and Biogen lower.
Elan also took a hit after mid-stage results of an Alzheimer’s study suggested results weren’t as positive as investors had first thought.
On the week Elan fell 70%, reminds CNBC’s Melissa Lee who’s filling in for Dylan Ratigan.
I still think the best play here IS Celgene , says Guy Adami. They could be a takeover target.
I’m sniffing around Biogen, says Karen Finerman. I think it was too beaten down.
TOPPING THE TAPE THIS WEEK: COMMODITY STOCKS
We’ve said it before but steel companies are red hot. This week U.S. Steel announced its profits more than doubled on increased demand.
Meanwhile shares of AK Steel are higher on speculation that it could be for sale. And there’s also speculation that steel maker ArcelorMittal is in talks to buy coal producer Alpha Natural .
US steel sold off on good news this week, explains Guy Adami. That suggests to me there’s now downside.
Mittal looks like it’s the cheapest in the sector, adds Tim Seymour. I think the story in steel remains in tact.
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On Aug 1, 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 (COST), (MSFT), (EMC), (WMT); Finerman Owns (GS); Finerman's Firm Owns (MSFT), (SUN), (TSO), (VLO), (RIG); Finerman's Firm And Finerman Own (C) Leaps; Finerman's Firm Is Short (XLF), (BBT), (COF), (IYR), (IJR), (MDY), (SPY), (IWM); Seymour Owns (AAPL), (CSCO), (F), (INTC), (MER), (MSFT); Seygem Asset Management Is Short (FXI), (VIP)
Accounts Over Which Bernstein And/Or Affiliates Exercise Investment Discretion Own More Than 1% Of (CSCO): Accounts Over Which Bernstein And/Or Affiliates Exercise Investment Discretion Own More Than 1% Of (JDSU): Accounts Over Which Bernstein And/Or Affiliates Exercise Investment Discretion Own More Than 1% Of (JNPR)
Bernstein Is A Market Maker In (COMS), (CSCO), (JDSU), (JNPR)
(CSCO) Is Or In Past 12 Months Was A Client Of Bernstein, Which Provided Non-Investment Banking Securities-Related Services And Received Compensation; (GLW) Is Or In Past 12 Months Was A Client Of Bernstein, Which Provided Non-Investment Banking Securities-Related Services And Received Compensation