The Dow rose sharply on Thursday after the government reported the economy grew at a surprisingly robust clip in the second quarter and oil prices eased.
It was GDP that really propelled the market, says Jon Najarian. Maybe it was program trading, maybe it wasn’t, but that’s what sent this market higher.
I don’t think the GDP is enough to turnaround the fundamental asset quality issues that will affect the banks going forward, adds Karen Finerman.
TRADING THE STORM
Tropical Storm Gustav was forecast to strengthen into a major hurricane in the Gulf of Mexico over the next few days, posing the biggest threat to U.S. energy infrastructure since the devastating hurricanes of 2005.
However, the price of oil moderated after the International Energy Agency pledged to open its emergency stockpiles if Tropical Storm Gustav damages U.S. oil and natural gas facilities in the Gulf of Mexico.
I think the thing to watch is reformulated gasoline, says Joe Terranova. I’d get long it (reformulated gasoline) and I think you can get long EOG Resources . But the hurricane is not a crude spot trade.
Terranova gets snaps from the forecasters. Planalytics senior vice president of energy Paul Corby says, “If you want to play it, I also think you should go long reformulated gasoline. But buy some puts because the market could come off again once the storm goes through.”
XTO Energy gets interesting if it dips down to $48, adds Guy Adami.
I don’t see a commodities trade based on this information, says Jon Najarian. But if Gustav is downgraded it could be good for AFLAC . And in energy I’m long the United States Natural Gas Fund but way out in April with bull call spreads.
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AFTER HOURS ACTION: DELL
Dell posted a disappointing drop in quarterly earnings and said spending cutbacks have spread from the United States to Western Europe and Asia, sending its shares down more than 10 percent after hours.
I didn’t think the numbers were a disaster, says Guy Adami. Yes gross margins were down but I see huge opportunity for them in India and China. I still like this stock.
Unusually heavy selling of calls suggests that investors were nervous ahead of earnings, adds Jon Najarian. But at current levels, I’d own some before the week is out. Also look at Lenovo and Hewlett-Packard if they’re dragged down on the back of the Dell numbers.
I like the fundamental story of Dell, as well as Hewlett Packard and Intel . There’s so much potential overseas, adds Joe Terranova.
BANKS LEAD MARKET
The brighter economic outlook coupled with a management shake-up at top U.S. mortgage finance company Fannie Mae boosted financial shares, which led market gains.
Also a Lehman analyst Bruce Harting became the latest among Wall Street analysts to say Fannie and Freddie have no immediate need for capital.
In the sector, Bank of America, the No. 2 U.S. bank, was the top boost on the S&P, while MBIA was the biggest percentage winner among Big Board stocks.
I would not be chasing the banks here, counsels Guy Adami.
I’m seeing extraordinary call volume in the Financial Select Sector SPDR, reveals Jon Najarian.
SEARS, TIFFANY’S LEAD CONSUMER STOCKS HIGHER
Consumer stocks marched higher as oil made its retreat.
Retail is interesting to me, says Karen Finerman. It’s been so beaten down. I like companies with strong balance sheets that show excess cash.
I wouldn’t rush into Tiffany’s at current levels, says Guy Adami. But then we told you to buy it a week ago. In general I think retailers over all are running their businesses better.
Look at Dick’s, adds Joe Terranova, because it rallied and then held its gains.
CHART OF THE DAY: NIKE BREAKING OUT
Shares of Nike closed higher after a Thomas Weisel analyst says the company should outpace the competition during the back to school season.
Options action suggests to me this stock should go higher, explains Jon Najarian.
It takes an awful lot to kill the US consumer, muses Karen Finerman. It’s in our DNA to consume.
GOING, GOING, GOLD ?
The price of gold climbed on Thursday for the third straight day after UBS said the dollar was “tapped out.”
I think there’s no shot that Europe raises interest rates, says Guy Adami. And on strong GDP the US could raise rates – both of which are not good for gold.
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Trader disclosure: On Aug 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; Adami Owns (AGU), (C), (BTU), (GS), (INTC), (MSFT), (NUE); Jon Najarian Owns (C), (JPM); Jon Najarian Owns (AAPL) Calls, (MRVL) Calls, (NKE) Calls, (XLF) Calls, (AFL) Calls, (PMCS) Calls, (TIE) Calls; Jon Najarian Owns (UNG) Call Spreads; Finerman Owns (GS); Finerman's Firm Owns (MSFT), (SUN), (TSO), (VLO); Finerman's Firm And Finerman Own (C) Leaps; Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM); Finerman's Firm Is Short The British Pound; Terranova Owns (AAPL), (RIMM), (EOG), (FCX), (GS), (KOL), (NOV), (POT), (SA), (X), (VLO); Terranova Owns (AIG) Puts; Terranova Is Long Dec. 2008 Reformulated Gasoline Futures; Terranova Is Long Crude Oil Time Spread (Long Oct. 2008 Crude Oil Futures, Short Dec. 2012 Crude Oil Futures)
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)