DOW UP 170 IN LATE SURGE
Stocks clawed back from five-year lows on Thursday, led by a bounce in energy and health-care stocks after oil recovered from a 16-month trough. Also top tier pharmaceutical companies posted reassuring earnings.
The session was typical of the recent volatility gripping Wall Street, with stocks swinging in a 7 percent range and the day's final direction only becoming clear in the last minutes of trading.
"There's been material turnarounds in the last 15-30 minutes of trading over a couple of trading sessions and there has been no fundamental reason," said Keith Wirtz, chief investment officer of Fifth Third Asset Management in Cincinnati.
"There's something unexplainable going on ... the wild swings are leading to speculation that something is going on and perhaps investigations into these erratic moves may take place, if they have not already."
HEDGE FUNDS IMPLODING
The day's sharp swings were exacerbated by hedge funds' and mutual funds' so-called forced selling of stocks to raise cash to meet their investors' large-scale redemptions, which also dragged on the market, traders said.
Once the darlings of Wall Street, hedge funds might well be suffering the heaviest losses from this bear market. According to TrimTabs CEO Charles Biderman as many as 25% of hedge funds will be out of business by end of 2009.
Because of forced selling some stocks might be to cheap and Dylan Ratigan asked the traders for their thoughts.
Due to hedge fund pressure Gap is probably too cheap, says Guy Adami.
If you have to play this game, I’d play Starbucks , says Jeff Macke.
Look at Vale in Brazil, adds Tim Seymour.
I like Chesapeake, counters Pete Najarian.
OIL REBOUNDS FROM 16-MONTH LOW
Oil rose on Thursday on expectations OPEC will agree to cut output at an emergency meeting after slowing demand and the growing financial crisis sent prices crashing from record highs set this summer.
I expect oil to bounce, says Guy Adami, but I’m more interested in the move in ExxonMobil , says Guy Adami. We’ll have to wait and see if it’s a value or not.
The beneficiaries of lower energy costs are the railroads, he adds. Keep an eye on Burlington Northern.
If you want to play oil, I’d do it with airlines , says Pete Najarian. They’re not an earnings play; they’re all about oil.
If you’re going to play this space get away from crude, exclaims Jeff Macke. I’d get long railroads and the airlines secondary.
Railroads are getting fuel cost recoveries and they’re maintaining their pricing power, adds Tim Seymour. Based on where they’re priced now, these stocks are more than priced for recession.
And Warren Buffett is so bullish on railroads he’s selling puts, adds Pete Najarian. In other words at a lower price he would be willing to own more railroads.
GLOBAL FINANCIAL PANIC WORSENING
While the world's major economies are sputtering, emerging ones like Argentina and Pakistan are also in distress, with investors fleeing from those markets and seeking shelter in low-risk U.S. and European government bonds. Speculation is growing on Wall Street that some emerging market governments could default on their loans.
I’m concerned about this issue, says Tim Seymour. There could be a run on the banks in Argentina. Political instability destroys confidence.
BATTLE THE BEAR: DRUGS STOCKS
If you’re looking to make a case for drug stocks you found it on Thursday. Shares of Celgene surged after the company beat the Street while Amgen boosted its profit outlook and Bristol Myers said profit tripled in the third quarter.
Amgen put up a huge number on Thursday, says Pete Najarian. Their top line drugs are performing. And the same is true for Celgene. But I’m most interested in Eli Lily , he says.
Celgene was owned by hedge funds in a big way, reveals Guy Adami. However I’m hearing it should be trading with a 68-handle.
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Trader disclosure: On Oct.23 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 (MCD), (MSFT), (WMT), (SDS), (UUP), (BNI); Seymour Owns (AAPL), (F), (MER); Seygem Asset Management Owns (RIO); Najarian Owns (BNI) And Is Short (BNI) Calls
CNBC.com with wires