STOCKS SURGE ON FANNIE, FREDDIE RESCUE
The Dow and S&P 500 soared on Monday as investors bet Washington's bailout of U.S. home finance companies Fannie Mae and Freddie Mac will stabilize the housing market and ease the credit crisis.
THE FEDS AND THE FINANCIALS
Shares in mortgage finance companies Fannie Mae and Freddie Mac plunged while their debt soared Monday, one day after the U.S. government took over the companies, as investors bet the action would wipe out stockholders but fully guarantee their bonds.
Are you any more confident buying stocks today than you were at any day earlier in the year, asks Dylan Ratigan.
Absolutely, exclaims Pete Najarian. But I don’t think this is the absolute bottom. The VIX traded higher Monday and that made me nervous about the believability in the rally. I took off some of my long positions and I shorted others. Or if you want a long trade, look at Morgan Stanely , he adds. I love the direction they’re taking.
All is not that well, adds Jeff Macke. But the financials are behaving okay. I was impressed that Wal-Mart broke out above resistance.
The rally gives me more confidence in the stocks that were already working such as Church & Dwight and Johnson & Johnson , says Guy Adami.
Things had to be pretty terrible for the government to do this, counters Karen Finerman. And I think some of the problems remain despite the bailout. For example we have an unemployment rate of 6.1%.
And if you’re looking for a gamble, the Fannie Mae preferred were obliterated on Monday, she adds. They look better to me than the common shares.
THE FREDDIE FANNIE RIPPLE
“I think that any bank that holds a lot of mortgages should rally in the short term,” says FBR analyst Paul Miller on Fast Money “(You might remember he pegged Monday’s rally on Friday’s Fast Money.)
“The question is what happens next. I’m concerned about Q4. We’re not out of the woods yet,” he says.
But if you’re a short-term trader there’s good news. “I think the current rally will go for a couple weeks The market is going to like the news and the stocks are going to run.”
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HOMEBUILDER ETF JUMPS 10%
With the Fannie and Freddie bailout in place, investors bid up shares of homebuilders including Toll Bros and Lennar on the belief that the mortgage crisis will improve.
30 year mortgage rates went from 6 ½% to 6%, says Guy Adami. That’s pretty significant. But homebuilding stocks are only trading instruments. If you’re looking to get long, look at Home Depot , Adami adds.
I’m not convinced that the bottom is in, adds Karen Finerman. Not at all.
It’s a volatile sector, reminds Pete Najarian. If you get gains of 5% to 10% make sure to take profits because it can go in the other direction pretty quickly.
If you own homebuilders I’d take profits, says Jeff Macke.
WILL FANNIE RESCUE HELP CONSUMER?
Retailers including Wal-Mart, Home Depotand Lowe’s all climbed Monday on hopes the bailout means the housing market will soon improve.
My only trade Monday was to sell retail on the open, says Karen Finerman.
WHALE WATCHING: JOHN PAULSON READY TO BUY?
Paulson & Co, a prominent New York hedge fund, said that billionaire John Paulson will now weigh buying shares or convertible bonds in banks and other financial institutions that need capital, the Financial Times reported on its website on Sunday. You might remember that John Paulson made billions for his funds last year betting against subprime mortgages.
That gets my attention, says Karen Finerman. I'd consider trading in his wake.
TECH STOCKS STRUGGLING AGAIN
Concern about the economy's health caused the Nasdaq to gyrate throughout the session, at one point falling into negative territory before a late afternoon surge; technology bellwethers Google and Apple were among the worst performers.
I’d look at Google, says Karen Finerman. The P/E levels are starting to become attractive.
Be Careful of RIMM, says Guy Adami. That chart is broken.
I think if RIMM hits $100, it will be a nice risk/reward trade, adds Jeff Macke.
RIMM has bounced off $100 so many times that I’d buy some puts so I can sleep at night and sell an upside call, counsels Pete Najarian.
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Trader disclosure: On Sept 8, 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 (DIS), (WMT), (MSFT) Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MST), (NUE); Najarian Owns (NVO); Najarian Owns (AAPL) And (AAPL) Collar; Najarian Owns (LEH) Put Spread And (LEH) Call Spread; Najarian Owns (MER) Put Spread; Najarian Owns (MS) And Is Short (MS) Calls; Najarian Owns (NOK) And Is Short (NOK) Calls; Najarian Owns (RIMM) Call Spread; Najarian Owns (XLF) And (XLF) Collar; Finerman Owns (GS); Finerman's Firm And Finerman Own (FLS); Finerman's Firm And Finerman Own (C) Leaps; Finerman's Firm Owns (HUN) Leaps; Finerman's Firm Owns (MO), (MSFT), (NOK), (SUN), (TSO), (VLO), (GE); Finerman's Firm Is Short (XLF), (IYR), (IJR), (MDY), (SPY), (IWM), (BAC), (COF); Finerman's Firm Is Short (BBT) And Owns (BBT) Puts
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