The Dow fell on Friday after government data showed the labor market deteriorated further in December, raising investor concerns about the outlook for profits and a deepening recession.
Payrolls were cut slightly less than expected, but the U.S. jobless rate climbed to its highest in nearly 16 years, pressuring already weak consumer spending.
Energy shares fell after Chevronjoined a growing list of bellwether companies warning about their profit outlooks. Also technology shares took a beating, causing the Nasdaq to briefly wipe out its 2009 gains, led lower by shares of Apple and Cisco .
Meanwhile, late day Morgan Stanley and Citigroup revealed they are deep in talks to merge their brokerage operations in a deal that could ultimately lead to Morgan Stanley taking over Citi's Smith Barney unit.
Thus far in 2009, the Dow is off 1.6 percent, while the S&P 500 is down about 1 percent.
Strategy Session with the Fast Money Traders
The jobs report was terrible but the equity market seems to be stabilizing, says Zach Karabell. I think that’s a positive in a week of negatives.
Keep an eye on the VIX , adds Pete Najarian. It suggests to me investors are not nearly as nervous as they were. That’s a good thing.
I don't like when people start comparing the current labor market to that of the 1940’s, says Tim Seymour. The labor pool is so much larger now. So the numbers aren't great by any means but they're not nearly as bad as people make them out to be.
I think the Citigroup news is big news, muses Karen Finerman. But I wonder what really lies beneath? How much of the business do they keep and how much is dismanteled.
FINANCIALS A BROAD LOOK
So far 2009 hasn’t been kind to the financial services sector. It’s the worst performing sector of the bunch. Take a look.
Financials In Last Place For ’09; YTD Performance
Cons. Staples -3%
Health Care -1%
The troubles in the financials services sector are probably not over, says Zach Karabell. But the world is different than it was 6 months ago. The government has made it clear that they will backstop the banks.
My concern lies with writedowns, adds Karen Finerman. When the calendar flips and the books are audited I expect to see more write-downs. If you’re looking for a trade in the financials look at shortingBB&T, she adds. I really do believe significant write-downs are in their future.
If you’re debt player shake hands with the government, suggests Tim Seymour. Look at the SPDR Barclays Capital High Yield or iShares Barclays TIPSBond Fund . Or Morgan Stanley Emerging Markets Debt and Western Asset Emerging Mrkts Dbt Fnd as ways to play it in the emerging markets.
BREAKING NEWS: GENENTECH
Genentech shares rose on Friday after a published report said Swiss drugmaker Roche was preparing to sweeten its offer to buy the portion of the U.S. biotechnology giant it does not already own.
The Financial Times' Alphaville web site said Roche was preparing to offer about $95 per share, likely ahead of its release of its year-end financial report in early February.
The news doesn’t surprise me, says Karen Finerman. The stock has been moving up – probably on speculation that a higher offer was coming.
I think they could be looking for a higher number still, muses Pete Najarian.
OIL PLUNGES ALMOST 12% THIS WEEK
Oil prices fell 2 percent on Friday after data showing a big rise in U.S. unemployment deepened the gloomy outlook for the world's biggest oil consumer.
Oil is an incredible real-time indicator of current economic activity, explains Zach Karabell. And when oil turns it will be a sign of the global economy turning.
I’d keep an eye on Haliburton and Schlumberger, counsels Tim Seymour. There could be problems in oil services stocks but the refiners look good.
The shipping rates are starting to bottom, adds Pete Najarian. That says to me look at Freeport McMoran or AK Steel . The suggestion is that the global economy could be picking up.
TECH'S BIG WEEK DISAPPOINTS
Despite some clever product introductions the Consumer Electronics Show failed to impress investors. The Technology SPDR ETF slid 2.7% on the week.
The biggest news coming out of the show was from Palm , says Pete Najarian. And I’d stay away from the chips. It’s a brutal market.
This would be a terrible time to bring out a great consumer device, adds Zach karabell. I think many companies could have great products ready to launch but are asking themselves – why do it now?
RETAILERS ROUGH WEEK
The first full week of January turned out to be a rough one for retailers ahead of the December sales numbers due out next week.
Wal-Mart led the drop in the sector after reporting a brutal forecast. Meanwhile, Best Buy , the top specialty retailer of consumer electronics, narrowed its full-year profit forecast on Friday after reporting weak December sales, sending its shares down more than 5 percent.
Sentiment is already so bad that even horrific numbers are already priced in, explains Karen Finerman. I’m long American Eagle and shortAbercrombie & Fitch against it.
If Best Buy gets near $23 I think it’s a buy, adds Pete Najarian.
I’m still bearish on Sony, adds Tim Seymour. I think the yen strength could choke this stock.
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Trader disclosure: On Jan 9, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Najarian Owns (CSCO), (DNA); Najarian Owns (XME) Calls, (NVLS) Calls, (NVDA) Calls; Najarian Owns (EEM) Long Call Spread ;Najarian Owns (ERTS) Long Call Spread; Karabell Owns (AAPL), (CL), (DRYS), (GOOG), (JPM), (NOK); Seymour Owns (AAPL), (BAC), (EEM), (F), (TSO); Seymour's Firm Owns (PBR); Finerman's Firm Owns (DSX), (MSFT), (DNA); Finerman's Firm Is Short (IYR), (IJR), (IWM), (MDY), (SPY), (USO), (ANF), (AEO), (BBT); Finerman's Firm Is Long (MSFT) Put Spreads
Jon Najarian Owns (C) Preferred Stock
CNBC.com with wires