S&P Ends Wild Week Higher
The S&P 500 rose on Friday after the U.S. government said it would throw a $17.4 billion lifeline to automakers grappling with falling consumer demand.
But the Dow ended lower, pulled down by energy shares as oil sank for the sixth day in a row on fears the anemic economy will swamp demand.
For the week, the Dow fell 0.7 percent, while the S&P 500 rose 0.8 percent and the Nasdaq gained 1.5 percent.
Strategy Session with the Fast Money Traders
Mortgage rates are coming down, says Pete Najarian referring to the historic action the Fed took earlier in the week. And REITs (such as Simon Property Group) had a phenomenal week.
Volatility has been going down, adds Joe Terranova. The VIX is at its lowest level since October 2nd.
It seems to me that risk is coming out of the market, adds Tim Seymour.
It feels to me like investors are packing up and saying we’re done for the year, adds Zach Karabell. There were very light volumes.
WAITING GAME IS OVER
General Motors and Chrysler will receive up to $17.4 billion in short-term loans from the US government as part of an aid package to the troubled auto industry.
President Bush announced the rescue plan at the White House.
The package involves $13.4 billion in short-term financing from the $700 billion Wall Street bailout fund, known as TARP.
An additional $4 billion will be made available in February, though that will be contingent on drawing down the remaining $350 billion of the TARP fund.
The rescue package includes limits on executive pay and warrants for non-voting stock.
The money comes with strings attached. If the companies are not viable by March 31, 2009, the loan will be called and all funds returned to the Treasury, according to the plan. Moreover, the companies can't issue new dividends during the period.
The package also includes conditions on operations, such as reducing company debt and making sure wages are competitive with transplant auto companies by the end of 2009.
I think the deal was already priced into the stock market, says Tim Seymour. Of course there are huge ancillary effects.
I expect to see moves in these stocks as investors trade the car companies for the short term, says Zach Karabell. But nothing has really improved. All that happened is Bush kicked the problem to Obama.
OIL PLUMMETS 27% THIS WEEK
Oil fell over 6 percent on Friday, as fears of economic slowdown weighed heavier than proposed production cuts by the world's major oil exporters.
U.S. light crude for January delivery, which expired Friday, settled down $2.35 at $33.87 a barrel, the lowest since February 10, 2004, when it ended at the same level.
Friday marks the sixth consecutive day of falls in oil, off nearly 30% from the $47.98 seen when prices last rose on December 11.
Also OPEC confirmed there’s no consolidated view on oil, adds Tim Seymour.
It seems to me oil has moved too much to the downside, says Pete Najarian.
There’s a negative sentiment about the future and that’s now deeply embedded in every market, muses Zach Karabell. That's what's dragging down oil.
DOLLAR SNAPS BACK WITH BIG MOVE
Meanwhile, the U.S. dollar rallied against the euro on Friday and also gained versus the yen after the White House said it will provide loans to struggling U.S. automakers.
The greenback had tumbled earlier this week after the U.S. Federal Reserve slashed its benchmark interest rates to zero. But analysts said the dollar’s move, which pushed the euro up more than 10 cents to as high as $1.4719, was probably overdone.
Keep dollar trading simple, says Joe Terranova. Use the 200 day moving average as your point of reference. Trade from the short side if the dollar goes below the 200-day. But when it’s higher as it is now keep playing from the long side.
I’d sell the CurrencyShares Euro Trust , counsels Tim Seymour.
S&P DOWNGRADES 11 BANKS
Standard & Poor's lowered the credit ratings of 11 US and European banks by one or two notches on uncertainty over future performances amid financial turmoil.
The banks named by S&P were Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, Royal Bank of Scotland, UBS and Wells Fargo.
It had almost no impact on the XLF , muses Pete Najarian. I think the S&P doesn’t have a lot of credibility anymore.
TOPPING THE TAPE: NASDAQ UP 1.5% THIS WEEK
Tech titans Oracle and Research In Motion pulled the technology sector higher on Friday after Oracle offered attractive guidance and RIMM said sales beat estimates.
I think you’ve got to like Research In Motion, says Pete Najarian.
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Trader disclosure: On Dec. 19th, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seygem Asset Management Owns (EEM): Seymour Owns (AAPL), (BAC), (F), (MER), (DXO): Karabell Owns (AAPL), (GLD), (GOOG), (JPM), (UYG); Pete Najarian Owns (UYG)
Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO; Virtus Diversifier PHOLIO Owns (IGE), (DBC), (DBV)
Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.; Virtus Investment Partners Owns More Than 1% Of (ABD), (ARE), (BIG), (OFC), (DLR), (EXR), (IGE), (MAC), (DBC), (DBV), (SKT), (UA), (CLB); Virtus Investment Partners Owns More Than 1% Of Seagate Tax Refund Rights
GE Is The Parent Company Of CNBC
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