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S&P Falls From 2 Month High

S&P 500 FALLS FROM 2-MONTH HIGH

The S&P fell on Monday with investors taking profits after last week's run-up; also concerns about slowing cell phone sales hit shares of the biggest telecommunications companies.

Dow components Verizon and AT&Tstumbled after Bernstein Research downgraded both companies, saying the stocks have "come too far, too fast" as it forecast slower wireless growth and worsening land-line performance.

Also, financial stocks fell after Deutsche Bank said loan losses for U.S. commercial banks could rise 3 percent by the end of 2010, hurt by a larger percentage of bad loans, greater consumer leverage and faster problem recognition by banks. That compares to loan losses of 1.5 percent in the third quarter of 2008.

Strategy Session with the Fast Money Traders

Growth names including casinos and shippers were off to the races on Monday, says Jeff Macke. We held technical support around 920 on the S&P. Take it for what it’s worth.

I think the market looks fine technically, adds Guy Adami. It was not a tragic day.

My view is that we’re in an economy that will deteriorate further, adds Karen Finerman. I expect to hear a bad employment number on Friday and with that the market should end this mini-euphoria.

It seems to me that we’re in a very cautious investment environment, muses Joe Terranova. Investors are watching and waiting. They’re taking very limited risk.

This is a traders market, adds Jeff Macke. Both Alcoa and US Steel have both rallied hard. I’d take gains in both names.

I’d look at Target , adds Adami. We’ve had 50% correction on this stock. It’s a traders dream in a tape that’s been unimpressive.

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OIL HIGHER FOR 3RD STRAIGHT DAY

Oil prices rose 5 percent on Monday as Israel's deepening incursion into Gaza and a dispute between Russia and Ukraine over natural gas heightened fears of supply disruptions

I don’t think the Middle East is really the catalyst, muses Joe Terranova. That’s been going on for 30 years. I think the recent move is tied to the fact that the US government has said they’re going to buy oil on the open market. However, I do not think 2009 is the year that oil surges above $100.

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DOLLAR GAINS ON STIMULUS HOPES

The dollar climbed broadly on Monday, hitting its highest level in three weeks against the yen as rising share prices eased some risk aversion and put the Japanese currency under selling pressure.

The stimulus package and the tax cuts suggests the US could be the first to stabilize, explains Joe Terranova. That gave the dollar strength.

It’s all relative, bristles Jeff Macke. The dollar’s strength speaks to how bad things are elsewhere.

Gold is making a pennant formation, adds Guy Adami. It could be bullish.

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MORE BRUTAL AUTO SALES

Major automakers reported U.S. sales in December that plunged by more than a third, closing out the weakest year for the battered industry in over a decade and a half.

Chrysler LLC led the industry lower with sales that dropped by 53 percent in December, a month when the struggling automaker and larger rival GM fought to clinch a $17.4 billion bailout from the U.S. government.

Toyota , the world's largest automaker, posted a sales drop of 37 percent, followed by Honda at 35 percent and Ford at 32 percent. GM and Nissan Motor Co saw sales drop by 31 percent.

The plummeting sales for December had been widely expected by analysts and industry planners but seemed certain to raise concerns about the depth of the ongoing recession in the early months of 2009.

People are keeping their cars longer, says Guy Adami.

No one wants to make a risky purchase like that, concurs Joe Terranova.

And Toyota had zero percent financing since October, reminds Jeff Macke.

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WHALE WATCHING: BYRON WIEN’S 10 SURPRISES

Pequot Capital’s Byron Wien revealed his 24th annual “Surprises List”

Byron Wien's 2009 Surprises

*S&P 500 Rises 30% To 1,200
*Gold Rises To $1,200
*Oil Returns To $80/Barrel
*Serious Downward Slide For Dollar
*NY State Threatens Bankruptcy

Source: Pequot Capital Management

I’m willing to entertain these surprises, muses Karen Finerman. They’re possible but not probable.

Foreign central banks hold $2.7 trillion worth of US reserves. If we see a dramatic sell-off in the dollar we’re in for big trouble.

And in case you're wondering, most of the traders agree the gold prediction is probably the least likely of the bunch to come true.




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Trader disclosure: On Jan. 5th, 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); Finerman's Firm Owns (OIH) Puts; Finerman's Firm Owns (DVN), (RIG), (MSFT), (IBB), (XBI, (DNA), (TBT); Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM), (USO), (BBT); Macke Owns (MSFT), (TM), (MGM)

Terranova Works For (VRTS); 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), (DLR), (EPR), (EXR), (IGE), (SLB), (MAC), (DBC), (DBV), (SKT), (UA), (CLB); Virtus Investment Partners Owns More Than 1% Of Seagate Tax Refund Rights; Virtus Investment Partners Owns More Than 1% Of Corporate Office Properties Trust SBI MD; Virtus Investment Partners Owns More Than 1% Of Goldman Sachs Financial Square Fund – Money Market Fund

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