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Stocks Fall On Earnings

Tuesday, 21 Oct 2008 | 6:25 PM ET

The stock market deteriorated in the final 20 minutes of trading with the Dow closing with triple digit losses.

Commodity shares fell on fears of a global recession and a rash of disappointing earnings heightened worries about the deteriorating profit picture.

Everything that worked on Monday didn’t work on Tuesday, exclaims a frustrated Pete Najarian.

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GLOBAL GROWTH BUST?

Oil companies and miners weighed on the broader market as commodity prices slid lower, still.

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Freeport McMoRan, the world's largest publicly traded copper producer, said quarterly profit fell by a third and would curtail planned mine expansions because of weaker metals prices and current economic conditions

Meanwhile Caterpillar, a maker of excavators and bulldozers, also missed profit expectations, sending its stock plunging.

For traders, it all comes down to valuations in CAT, says Guy Adami. I think at some point this stock will become compelling. And on the flip side 3M looks a little rich. For a trade I’d buy CAT here and sell 3M.

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OIL DOWN $3

Oil prices tumbled on Tuesday amid worries that a global recession would crush fuel demand, limiting the impact of any supply cuts by OPEC.

The action in crude is unbelievable to me, says Guy Adami. I expect to see it trade down in the 60’s but it will probably overshoot to the downside just like it did to the upside.

I bought some McDonald’s based on prices at the pump, adds Jeff Macke. Lower gas prices should give consumers a little extra money in their wallet. But I’d hedged my long MCD trade against the S&P 500 .

Watch Continental , adds Pete Najarian. Of all the airlines, they are the most leveraged to the price of oil. They only have 14% of their fuel hedged for 2009. Also, I’m watching the dry bulk shippers, he adds. I wouldn’t bottom pick but I’d keep an eye on it.

Look at Genco , counsels Jeff Macke. The stock is down 75%.

The shippers can turn quickly but they have debt so I’d wait before rushing in, counsels Karen Finerman.

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AFTER HOURS ACTION: APPLE,

Apple said on Tuesday that quarterly profit rose 26 percent, driven by sales of its new iPhone, but it issued a forecast for the current quarter well below Wall Street expectations.

Apple had record Mac sales, says Pete Najarian. That’s what interests me. I’m not worried about their weak guidance because they always do that.

I think Wednesday could bring a capitulation bottom in Apple, says Guy Adami. Apple with an 83-handle might be worth a trade.

If you’re buying Dell on Apple’s news you’re making the wrong trade, exclaims a disgruntled Jeff Macke.

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AFTER HOURS ACTION: YAHOO

Yahoo reported a profit that declined from last year but matched analysts' expectations. The Internet advertising firm also lowered its revenue outlook and said it will cut 10 percent of its workforce.

Yahoo has been so beaten and with Carl Icahn running the show there, maybe the stock will start to move, speculates Pete Najarian.

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GOLDMAN CALL SINKS CITICitigroup may not be profitable over the next 12 months, said a Goldman Sachs analyst, who recommended a "paired" trade in which investors short the bank's stock and buy Morgan Stanley shares .

Are you kidding me, exclaims Jeff Macke. How late have they been with the whole thing?

I think it’s just mean, says Karen Finerman, And it makes me wonder if Goldman can see that in Citi because they see it in themselves. I’d stay away.

S

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MONEY MARKETS LOOSENING

The U.S. Federal Reserve on Tuesday launched a new program to fund purchases of up to $600 billion worth of money market mutual fund assets in the latest step to provide liquidity to strained financial markets.

The initiative "should improve the liquidity position of money market investors, thus increasing their ability to meet any further redemption requests and their willingness to invest in money market instruments," the Fed said in a statement.

This is a big deal, says Karen Finerman. The Fed is just all in. Whatever the private market won’t buy, evidently they will.

Every day I expect to see improvement in the credit markets, says Guy Adami. Small improvements, but progress none the less.

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BATTLE THE BEAR: DRUG STOCK?

Drug stocks failed to rally on Tuesday despite strong earnings from Pfizer , Schering-Plough and Biogen .

Don’t run to drug stocks as a safe haven, counsels Pete Najarian. That’s not the reason to get into this space. But if you want to play drugs of all the companies, I like Genentech best because of the potential of a deal with Roche.





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Trader disclosure: On Oct. 21, 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); Macke Owns (UUP), (MCO), (MSFT), (SDS), (BNI); Finerman Owns (GS): Finerman’s Firm Owns (MSFT); Finerman’s Firm Owns (DNA) Call Spreads; Finerman’s Firm Owns (OIH) Puts; Finerman’s Firm Is Short (IYR), (IJR), (IWM), (MDY), (SPY), (COF), (BBT), (USO): Najarian Owns (EMC), (BNI): Najarian Owns (AAPL) And Is Short (AAPL) Calls; Najarian Owns (AXP) Put Spread; Najarian Owns (FCX) And Is Short (FCX) Calls; Najarian Owns (MS) And Is Short (MS) Calls; Najarian Owns (RF) And Is Short (RF) Calls; Najarian Owns (MSFT) And Is Short (MSFT) Puts; Najarian Owns (CAL) And Is Short (CAL) Calls; Najarian Owns (MGM) And Is Short (MGM) Calls; Najarian Owns (BNI) And Is Short (BNI) Calls

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  Price   Change %Change
DJIA
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BIIB
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C
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CPT
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CAT
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4331
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FCX
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GNK
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GS
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MMM
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MS
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PFE
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SPY
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YHOO
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AAPL
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MCD
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  • Chief Market Strategist for Virtus Investment Partners & CNBC Contributor

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