DOW DROPS AS BANKS FALL
The news: The Dowdeclined by triple digits on Wednesday with financial shares selling off for a second straight day on fresh concerns about the widening impact of the mortgage crisis.
BANKS KNOCK MARKET AGAIN
The news: Investors sold off shares of major banks and other financial firms, a day after JPMorgan Chase said it had racked up an additional $1.5 billion in write-downs stemming from soured mortgage-related investments.
Both Citigroup and Bank of America were hit hard after Merrill analyst Richard Bernstein wrote in a client note that the credit crisis is “far from over.”
The play: I see more room to the downside in banks, says Karen Finerman. That’s not to say they can’t bounce but I’m happy to be short.
I’m a little nervous, says Pete Najarian. Wells Fargo and JP Morgan had “hung in there” through the whole mess. But they’re both raising cash and it makes me concerned.
They’re raising money for one of two reasons, adds Finerman. They either need the capital or they see opportunity in the sector. I’m going with the former.
It’s technical analysis 101, exclaims Jeff Macke. Once these things break their support, the trend lines are gone!
BIGGEST OIL JUMP THIS MONTH
The news: A rebound in oil prices added to the negative tone in the market after a government report showed unexpectedly large declines in crude and gasoline stockpiles in the latest week. Gasoline stocks fell by 6.4 million barrels, the Energy Information Administration said, which was far greater than analysts had expected.
The play: In crude I wouldn’t buy the dip, I’d sell the rally, counsels Guy Adami. I expect to see a little more bounce but I’m not impressed. If you’re looking for a trade look at Schlumberger . At current levels it looks attractive.
The Energy Select Sector SPDR and Oil Service HLDRSmoved up but not to the magnitude they should have, says Pete Najarian. I’m not impressed. If you get one more day down in oil, I’d get into the airlines. United around $10 looks attractive to me as a way to trade oil.
I’m longer oil services stocks, reveals Karen Finerman.
I think the industry is garbage and I don’t think these stocks are going anywhere, says an annoyed Jeff Macke.
TOPPING THE TAPE: COMMODITY STOCKS ROAR HIGHER
The news: U.S. Steel, Potash , and Mosaic all rebounded on Wednesday from the August commodity swoon. Also gold has soared after recently declining to a 7-month low.
The play: I wouldn’t try and fight the institutional sellers that are rolling out of this sector, says Pete Najarian. Wait on these names.
If you want to trade I think you can get long Arch Coal on the long side, counters Jeff Macke. But watch the trade tick for tick.
MACY'S, RETAIL NAMES ADD TO SELLOFF
The news: Retailers fell, after women's apparel retailer Liz Claibornecut its 2008 profit forecast, citing economic concerns, and Macy's cut its fiscal-year earnings forecast, warning that cutbacks in consumer spending could push sales down further at its stores.
The play: I thought action in Macy’s was pretty good considering the current environment, says Jeff Macke. Overall, the risk in retail is to the downside.
APPLE CAN’T HELP TECH
The news: Technology shares fell on concerns that the economic slowdown will hurt business and consumer spending. Research In Motion , the BlackBerry maker, was the top drag on the Nasdaq offsetting a rise in shares of Apple following news it will expand sales of its iPhone in an alliance with top U.S. electronics chain Best Buy
The play: My tech play is Nokia , says Pete Najarian. I’m back in because options traders started buying the October 27 calls very aggressively. I like their product line and their aggressive stance.
I thought AMAT was going to pull back but it didn’t says Guy Adami. I think it has more room to the upside.
ANALYZE THIS: MICROSOFT TO RISE 40%
The news: Microsoft plans to buy back as much as $20 billion of its stock to boost its flagging share price according to UBS analyst Heather Bellini. She tells Fast Money that after speaking to people inside Microsoft, she expects Microsoft to complete the repurchase over the next three months, and said the amount is at least five times larger than its average share buyback per quarter in the last fiscal year.
“We think they could issue $8-$12 billion worth of debt," she says Bellini on Fast Money. "They would get great rates.”
Bellini expects the market to hear definitively fairly soon: either when the board meets to declare the dividend or when they report earnings in October.
Traders, what do you think?
Both Karen Finerman and Guy Adami think the stock looks cheap.
A disgruntled Jeff Macke blurts out, “But are they actually doing it or is an analyst just talking about it!”
It’s probably worth noting Bellini was ranked the best software analyst by Institutional Investor magazine last year.