STOCKS RALLY ON POTENTIAL LEHMAN SALE
The Dow rose on Thursday after a late-day report suggested that Bank of America is in talks to buy embattled investment bank Lehman Brothers .
LEHMAN PLUNGES ANOTHER 42%
After hours the Washington Post reported that there could be other buyers, at least potentially. According to the Post the Treasury and Fed are negotiating with a syndicate of private equity firms to take over Lehman Brothers . The news sent share lower in after hours trade.
CNBC’s Steve Liesman contacted his sources at the Treasury, which confirmed the talks, however he says to characterize it as the Treasury engineering a takeover goes beyond where the Treasury is at.
As first reported by CNBC, Lehman CEO Richard Fuld has been talking to several financial institutions about a potential purchase, reminds Charlie Gasparino. And it remains unclear, however, just how interested these institutions are in a complete purchase. It's also unclear what price Lehman could fetch.
What’s scary is, if the Treasury is putting together a consortium, that means Dick Fuld could not sell the bank today, Gasparino concludes.
“We’ve been concerned about Lehman for quite some time,” adds Sean Egan, president Of Egan-Jones Rating Co. “The current problems are manifestations of things that were already in the portfolio before. The problem right now is that it’s not self-sustaining.”
“And as for Bank America being mentioned as a suitor…. CEO Ken Lewis doesn’t like investment banking firms,” Egan adds. “I don’t think they’re a suitable buyer for Lehman.”
Meanwhile, Washington Mutual shares sank below $2 for the first time since 1990 as anxiety grew about the largest U.S. savings and loan's mortgage losses, capital needs and survival prospects.
Washington Mutual, as well as Lehman and AIG have all had leadership changes in the last 6 months and the market doesn’t like it, adds Joe Terranova. The problem is the market doesn’t know the course they will take.
“Over the long term the financial system has to stand on its own,” says Sean Egan. “I hate to see the government involved in making mortgages. You don’t want Congress deciding who gets a mortgage and who gets foreclosed.”
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DOLLAR HITS 1-YEAR HIGH
Fearing a global slowdown, traders bid the dollar to a one year high against the euro as well as other major currencies.
Meanwhile gold touched an 11-month low on Thursday.
Investors have been long gold for a while, explains Joe Terranova. But when the dollar is rallying there’s no need to maintain this trade.
Gold is only useful is we’re going back to the age of druids, exclaims Jeff Macke. But then again, it would be hard to get in touch with your broker.
OIL CONTINUES ITS UNWIND
Oil prices fell toward $100 Thursday, pulled lower by strength in the U.S. dollar, soft global energy demand, and a report Saudi Arabia has no plans to cut output despite OPEC's agreement this week to trim supply.
At the end of the day the market is working off gasoline inventories, explains Joe Terranova. The best trade in the space is long refiners. I like Valero.
And the airlines are taking off on lower oil, adds Pete Najarian.
If you want to play consumers on lower gas prices, look at Wal-Mart says Jeff Macke. Target and the Gap also look good for a trade.
TRAINS, AG AND COAL JUMP
As the song says, “might as well jump!” Despite getting hammered recently, railroad CSX closed higher Thursday after it raised its guidance; also Monsanto raised it’s forecast and coal names including Massey and Arch Coal traded higher Thursday.
I’ve been telling you to buy these names on the dip, says Guy Adami. If you’re chasing them now you’re making the wrong trade.
Burlington Northern never broke it’s 200-day moving average, counters Joe Terranova, despite the big market sell-off. I think rails are a great play in the fourth quarter.
OPTIONS ACTION: SEMICONDUCTORS HLDRS
Pete Najarian is seeing unusual options action in the Semiconductors ETF.
Options volume in the SMH Jan 26 calls suggests to Pete that Intel , Texas Instruments and Applied Materials could all go higher.
BRISTOL STICKING BY BID
Despite word of a mystery bidder offering more, Bristol Myers Squib said it would stand buy its $60 / share bid for ImClone .
The pharma industry continues to consolidate, says Pete Najarian. I think the best trades to put on as a result of the trend are Imclone and Biogen .
Or look at Celgene, adds Guy Adami.
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Trader disclosure: On Sept 11, 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 (WMT), (UUP), (MSFT); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Najarian Owns (AAPL) And (AAPL) Collar; Najarian Owns (AKS) Call Spread; Najarian Owns (MER) Put Spread; Najarian Owns (MS) And Is Short (MS) Calls; Najarian Owns (XLF) And (XLF) Collar; Terranova Owns (AAPL), (EOG), (FCX), (GS), (NOV), (KOL), (POT), (RIMM), (SA), (X), (VLO), (YHOO); Terranova Owns (AIG) Puts And Owns (AIG); Terranova Is Short December 2008 Dollar Index Futures
Terranova Is Chief Alternatives Strategist Of Phoenix Investment Partners, Ltd.; Phoenix Investment Partners Owns More Than 1% Of (ABD), (ARE), (BIG), (BRE), (CNTY), (CNW), (CLB), (OFC), (DLM), (DRH), (DLR), (EPR), (ESS), (EXR), (AGM), (FL), (GBL), (GNET), (IGE), (LNET), (MAC), (OIIM), (PSPT), (DBC), (DBV), (SLB), (GWX), (SSYS), (SKT), (UA), (BIV), (VV), (BLV); Phoenix Investment Partners Owns More Than 1% Of Goldman Sachs Financial Square Fund - Money Market Fund; Phoenix Investment Partners Owns More Than 1% Of Seagate Technology Tax Refund Rights
Terranova Is Co-Portfolio Manager Of The Phoenix Diversifier PHOLIO; Phoenix Diversifier PHOLIO Owns (IGE), (DBC), (DBV)