Bailout Bust: Stocks Drop
BAILOUT BUST: STOCKS DROP
Wall Street ended its worst week in seven years with another tumble on Friday on fears a $700 billion financial sector rescue plan won't unlock credit markets or stave off a U.S. recession.
Financial stocks, which had traded sharply higher on the promise the bill would be passed, fell after the House vote on profit-taking and as the market focused on the tough road that still lies ahead for the U.S. economy.
I don’t think the credit markets can turn on a dime, says Guy Adami. I think you’ve got to let it sort itself out now for about 2 or even 3 weeks. Then it should get better.
DIAMONDS ON THE MUCK
Despite all the market mayhem some stocks still look attractive to the traders. Specifically, they like Freeport-McMoRan ,Petrobras and Apple . Here’s why.
Keep an eye on FCX, says Guy Adami. I think the stock is setting up for capitulation.
I’d keep an eye on Celgene and CME , adds Joe Terranova. They look like they’re oversold to me.
There’s a real world economy out there, says Zach Karabell. But it’s being priced as the mother of all depressions. It’s not. There are currently values out there that you won’t find again for many year.
I’d buy Petrobras , right here and right now, says Tim Seymour. Considering the strength of this company, Petrobras is an innocent victim.
BREAKING NEWS: BARCLAYS AND STATE STREET
In breaking news CNBC’S Mary Thomson explains that the Treasury has asked Barclays and State Street to manage their purchases of Freddie and Fannie mortgage-backed securities.
CITI DROPS 20% AS WELLS FARGO BIDS FOR WACHOVIA
Shares of Citigroup plunged lower after Wachovia announced a merger agreement with Wells Fargo . The deal scraps a previous agreement in which Citigroup was to buy parts of Wachovia. Citigroup intends to sue.
I think it’s madness, says Guy Adami.
The interpretation is that if Citigroup can’t get the deal done, there might be more problems on their balance sheet, says Tim Seymour. But I don’t think that’s an accurate interpretation.
Keep an eye on USB , JP Morgan and Wells Fargo, adds Adami, because valuations are at all time highs. Maybe they deserve them.
The value of these stocks trading in the current market is like the value of a waterfront home that’s about to be sold ahead of a hurricane, says Zach Karabell.
PAYROLL DROP BIGGEST SINCE MARCH 2003
The monthly jobs report released early Friday suggested the economy may be in a recession. U.S. employers cut 159,000 jobs last month, the ninth straight monthly reduction and the steepest decline in five and a half years.
I think we need to see a globally coordinated easing effort on the part of all Central Banks before the credit crisis eases, says Joe Terranova. Pretty cheap.
LIQUIDATION: COMMODITY STOCKS
Oil fell on Friday, dragged down as demand concerns outweighed optimism after a rescue bill for the U.S. financial sector was signed into law.
Analysts said that while the bailout could help stem a more serious downturn in the economy, it was likely to do little to bolster flagging oil demand.
EMERGING MARKETS DROP 13% THIS WEEK
Markets around the world continue to sell-off with investors fearing a widespread economic downturn across the globe.
Emerging markets don’t have trouble with liquidity or credit, says Zach Karabell. At the corporate level they’re not as levered.
I don’t agree. On a corporate level I think things are worse there than they are here, counters Tim Seymour. Sorry Zach, I think Russia, Brazil and South Korea are major credit roll over stories.
I’m not saying the credit is golden, adds Zach. I’m looking at the overall cash position.
Strategic investor Dennis Gartman sees it a little differently. He recommends looking at the big picture. “When it comes to China, they’re leaping from a 16th century economy to a 21st century economy,” he says. “It’s a tidal wave that’s not going to stop anytime soon.”
HEDGE FUNDS POST WORST MONTH IN 10 YEARS
Hedge funds made history in September but not the kind most managers want to remember.
Preliminary estimates show that the average hedge fund lost about 10 percent last month when Lehman Brothers collapsed, financial stocks tumbled, and regulators around the world quickly put a ban on shorting financial stocks to help steady markets.
Among the biggest losers, the flagship fund at Kenneth Griffin's Citadel Investment Group, boasting one of the industry's best long-term records, lost roughly 15 percent in September, leaving it down about 20 percent so far this year.
Hedge funds are massively exposed to emerging markets, reminds Joe Terranova. That has a lot to do with the unwind.
Hedge funds seem to be selling into every rally, explains Guy Adami.
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Trader disclosure: On Oct. 3, 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), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Karabell Owns (AAPL), (AGU), (BHP), (GOOG), (JPM), (MS), (RIMM); Seymour Owns (AAPL), (INTC), (MER); Terranova Owns (AAPL), (EOG), (FCX), (FTO), (GS), (MA), (NOV), (POT), (X), (VLO)
Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.; Virtus Investment Partners Owns More Than 1% Of (ABD), (ARE), (BIG), (CNW)
, (OFC), (DLM), (DRH), (DLR), (EPR), (EXR), (FL), (SLB), (LNET), (MAC), (DBC), (DBV), (SKT), (UA), (BLV), (VV), (CLB), (GWX), (IGE), (FSMXX); Virtus Investment Partners Owns More Than 1% Of Shares Of Incitec Pivot Ltd.; Virtus Investment Partners Owns Seagate Tax Refund Rights; Virtus Investment Partners Owns Seagate Technology Tax Refund Rights; Virtus Investment Partners Owns More Than 1% Of Shares Of Essex Property Trust Inc.
Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO; Virtus Diversifier PHOLIO Owns (IGE), (DBC), (DBV)
Gartman Owns (CME), (KBE), (SDS)
GE Is The Parent Company Of CNBC
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