MARKET SHAKES OFF CREDIT FEARS
The Dow closed slightly higher in choppy trade on Wednesday as strong results from Hewlett-Packard triggered a rally in the technology sector that offset a slump in shares of Fannie Mae and Freddie Mac.
CAN BANKS SCALE WALL OF WORRY
Financials also rebounded from Tuesday's sell-off as U.S. crude oil prices fell about 50 cents per barrel, supporting hopes inflation will ease and interest rates will remain low, helping the bank sector.
But shares of housing finance giants Fannie Mae and Freddie Mac plunged on growing concerns that a possible government bailout might dilute shareholder value.
There’s fear in the marketplace right now, says Pete Najarian. I have a short position in Lehmanbecause it’s trading in a similar way that Freddie and Fannie traded about a month ago. On the long side I like Morgan Stanley .
I think it’s hard to go outright short in Lehman, adds Guy Adami, but it feels like the stock wants to move lower. If you want a best of breed trade look at USB .
I cut my Financial Select Sector SPDR position in half on Wednesday, reveals Joe Terranova. Why? Because on September 30th $230 billion dollars worth of bonds mature and Freddie / Fannie need to roll that debt. If they can not do it the Fed is going to have to come in and bail them out.
I think the financials are a total crap shoot, exclaims Jeff Macke. Equity holders in Freddie and Fannie are going to get flushed.
> Click here to find out what options action in Freddie and Fannie suggests to Jon Najarian.
OIL FINISHES DAY HIGHER
Oil rose slightly after Russia's angry response to the U.S.-Polish accord raised the threat of a supply disruption from the huge energy producer.
Also Goldman Sachs’s reiterated on Wednesday its year-end price forecast of $149 a barrel for U.S. crude oil, and said strong fundamentals were a more important factor than a strengthening dollar.
I agree with the fundamental theme behind that forecast, says Joe Terranova. I think the play is integrated oil as well as the oil services names.
Schlumberger is holding it’s valuation around $90, adds Guy Adami. It’s probably the best play in the space.
I like the United States Oil Fundoff $90, says Jeff Macke. But with a very tight stop. If it drops to $89.50 and I’m out.
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What do you think? Answer the Charles Schwab Question of the Day.
TOPPING THE TAPE: COMMODITY STOCKS
Spooked by financials it appears investors are putting money to work in commodity stocks. From steel to energy the commodities sector performed well on Thursday.
I’ve liked U.S. Steel for quite a while, reminds Guy Adami, but in my opinion it’s probably a little late to get on board.
Take a look at Burlington Northern, adds Pete Najarian. The rails look cheap to me because I think the upside is very good.
H-P, APPLE LEAD TECH HIGHER
Hewlett-Packardquarterly profit rose a forecast-beating 14 percent, raising hopes that demand from abroad will support technology spending, despite weakness in the United States.
It wasn’t a fantastic quarter, says Guy Adami. It was an okay quarter. However, I think HPQ at 11 times forward earnings is a cheap stock.
In the $40’s I also think this stock is worth a look, adds Joe Terranova.
Look at Dell and IBM instead, counsels Pete Najarian. A lot of HP’s revenue comes from overseas and as the dollar gets stronger that's a problem.
> Apple-Mania: Find out why Piper Jaffrey analyst Gene Munster says “Get Long Apple, Now!”
Another solar company has captured the spotlight. This time it’s Suntech Power. . The Chinese solar cell maker reported a 58 percent rise in quarterly profit on higher production capacity, greater demand and foreign exchange benefits
It seems to me that more people are buying into the idea that alternative energy is more than just the flavor of the moment, says Pete Najarian. Energy Conversion Devices and , First Solar are jumping right now. You can play solar through Applied MaterialsAMAT and Cypress, he counsels.
This was a big quarter for alternative energy; solar turned the corner. I’m long Cypress, adds Jeff Macke. I think they’re generating real revenues, real returns and real earnings. That was a sea change.
AFTER HOURS ACTION: LIMITEDLimited Brands said its profit fell by more than half in the second quarter amid a difficult retail environment, but results beat expectations as the company kept a tight rein on its inventory and expenses.
I’m not that impressed, says Jeff Macke. Naughty underpants sell well in most any market.
OLYMPICS PLAY: DICK'S
Baird upgraded Dick'son Wednesday partly due to the popularity of the Olympics and a belief it could drive interest in sports.
I don’t know if I agree with the theme but I think there’s a chance you’ll see a short covering rally, muses both Guy Adami and Joe Terranova.
BEIJING BOOM: CHINA STOCKS SPIKE 8%
Some investors are seeing signals that China’s government will soon launch a stimulus plan and the optimism sent that stock market 8% higher in one day.
I think you’re playing in the deep end of the pool if you go into China , says Guy Adami. Nonetheless there’s always a trade if you have an exit strategy.
RUSSIA UPPING THE RHETORIC
Tensions are running high between Russia and the United States over an agreement made between the two nations to build a future missile defense base in Poland.
Secretary of State Condoleezza Rice says the base is no threat to Russia. But Moscow disagrees. Russia predicts the system "will be broadened and modernized" and says it will be forced to react "and not only through diplomatic" channels.
If nothing more it’s bullish for oil, says Joe Terranova.
CASINO STOCKS RECEIVING PESCI-LIKE BEATING
Casino stocks have fallen this summer on concerns of a slowing economy and news the Chinese government may act to curtail visits by mainlanders to Macau, the only place in China where gambling is legal.
How should you play the space now?
“I think casino stocks are way oversold and there are real opportunities here if you can pick and choose,” says Jefferies Senior Gaming Analyst Larry Klatzkin on Fast Money. “If you can be a little patient I think you could make a lot of money over the next year.”
Here’s Klatzkin’s thesis for that trade: Gambling is something that people don’t stop doing in bad times. In fact it becomes more attractive. And when the economy turns people will come back to Las Vegas in droves.
"The best name in the space is probably Wynn but only as a short term play,” says Klatzkin. “Long term Las Vegas Sands is my buy.”
But the growth story is not controllable in Macau, counters a disgruntled Jeff Macke. And the economy stinks. I don’t buy it, he exclaims. And I wouldn't buy the casinos.
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Trader disclosure: On Aug 19, 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 (CY), (MSFT), (WMT); Adami Owns (AGU), (C), (BTU), (GS), (INTC), (MSFT), (NUE); Pete Najarian Owns (AAPL) And Is Short (AAPL) Calls; Pete Najarian Owns (CSCO) Call Spread; Pete Najarian Owns (LEH) Put Spread; Pete Najarian Owns (MS) And Is Short (MS) Calls; Pete Najarian Owns (NVDA) Calls And (NVDA) Call Spread; Terranova Owns (AAPL), (BNI), (CME), (EOG), (FCX), (GS), (GOOG), (INTC), (KOL), (NOV), (POT), (RIMM), (SA), (XLF), (SU), (X), (VLO), (YHOO); Terranova Owns (AIG) Puts; Terranova Is Short Crude Oil Time Spread (Short Dec. 2009, Long Dec. 2012); Terranova Is Long Crude Oil Futures (Dec. 2012)
Terranova Is Chief Alternatives Strategist Of Phoenix Investment Partners, Ltd.; Phoenix Investment Partners Owns More Than 1% Of (ABD), (ARE), (BRE), (CNTY), (CLB), (OFC), (DLR), (ESS), (EXR), (FL), (IAT), (IGE), (LNET), (MAC), (OIIM), (PSPT), (DBC), (DBV), (SLB), (SKT), (BLV)
Terranova Is Co-Portfolio Manager Of The Phoenix Diversifier PHOLIO; Phoenix Diversifier PHOLIO Owns (IGE), (DBC), (DBV)
Piper Jaffray Is A Market Maker In (AAPL)
Klatzkin Owns (LVS), (MGM); Jefferies Expects To Receive/Seek Paid Investment Banking Asssignments From (LVS), (MGM) In Next 3 Months; Jefferies And/Or Affiliates Received Non-Investment Banking, Securities Related Compensation For Services Provided To (WYNN); Jefferies Is A Market Maker In (WYNN)