U.S. stocks suffered their worst decline in more than a month on Wednesday after a grim ADP private-sector jobs report coupled with a revenue warning from top chip maker Intel revived deep concerns about the economy.
Strategy Session with the Fast Money Traders
ADP changed their methodology, explains Zach Karabell. We’ll have to wait until Friday to see if they’re more accurate.
Unemployment is a backward looking indicator anyway, reminds Guy Adami. I think the key to the sell-off was the decline in oil .
The news was bad and then everything kind of snowballed, muses Pete Najarian. If you follow charts the day was a dream come true because the S&P got up to 950 -- a point of technical resistance -- and then fell.
I think the market needed to pull back after a 6-day build, says Tim Seymour. I would wait for the market to sell-off when Obama speaks on Thursday and when the S&P hits 888 it will hit a point of technical support. Then I'm a buyer.
BAD NEWS: INTEL SALES PLUMMET
Recession fears heightened after Intel said its revenue for the fourth quarter would not meet the lowered forecast it had given in November, citing weakening demand for personal computers. Intel, the world's biggest maker of the central processing units at the heart of every PC and a technology bellwether, was among the main laggards on the Nasdaq.
I’m not that surprised by the news, says Pete Najarian. Intel had a nice run so investors probably took some off the table.
If Intel shares pull back to around $13.87 it would be a good level to get long, counsels Guy Adami.
BAD NEWS: TIME WARNER SEES 2008 NET LOSS
Further evidence of the spreading recession came from media company Time Warner , which forecast a fourth-quarter loss.
I’d play the space with Televisa, cousels Tim Seymour.
BAD NEWS : OIL PRICING IN DEEP RECESSION
Oil prices slid as much as 12 percent on Wednesday, the largest percentage drop in seven years, after a U.S. government report showed crude inventories rose much more than expected.
I think there will be an opportunity to buy oil around $38, adds Guy Adami.
When you talk about the commodities trade, I think it's important to separate oil from the base metals. I think you can see weakness in oil and strength in base metals, says Zach Karabell.
BAD NEWS: MORE BANK LOSSES
The financial services sector took a hit after prominent banking analyst Meredith Whitney said banks will have to raise fresh capital in 2009, and a sharp increase in credit-rating downgrades on mortgage-related securities will lead to further stresses.
"From July 2007 to date, over $5 trillion worth of securities have been downgraded, but our concern here is that the pace of downgrades has only accelerated through 2008," the Oppenheimer analyst wrote in a research note dated January 6.
It’s easier to say things are getting worse than things are getting better, muses Zach Karabell.
If you’re looking for a play in this space I’d look at Visa around $51, counsels Pete Najarian.
I prefer Goldman at $78, adds Guy Adami.
GOOD NEWS: CREDIT WHEELS MOVING
It appears the credit crisis might be easing further. CDS spreads are shrinking and GE Capital has become the latest to issues bonds.
Brazil also did a big issue, reminds Tim Seymour. There’s appetite in the credit markets and that’s a positive. You can play it with the iShares iBoxx $ High Yid Corp Bond , or SPDR Barclays Capital High Yield B.
GOOD NEWS: BIOTECH BUYING
The WSJ is reporting that drug giant Wyeth is in talks to buy Crucell , a Dutch company that specializes in vaccine technology. “The deal could potentially make it faster, better and cheaper to make all kinds of vaccines,” says CNBC Pharmaceuticals Reporter Mike Huckman.
If you're trying to game the space, it's hard to pick a takeover target in biotech, says Pete Najarian. But deals are happening and I expect to see more consolidation. You can play it broadly with the Health Care SPDR or the iShares NASDAQ Biotechnology Index .
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Trader disclosure: On Jan. 7th, 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); Najarian Owns (CSCO), (MSFT); Najarian Owns (XME) Calls, (NVLS) Calls, (NVDA) Calls; Najarian Owns (XLB) Call Spreads; Najarian Owns (EEM) Long Call Spread; Najarian Owns (ERTS) Long Call Spread; Najarian Owns (MSFT) Short Calls; Seymour Owns (AAPL), (BAC), (EEM), (F), (FXI); Karabell Owns (CL), (DRYS), (FCX), (GOOG), (JPM), (NOK); Doug Kass Is Short (TLT)
CNBC.com with wires