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Stocks Rise In The Face Of Bad News

STOCKS RISE IN THE FACE OF BAD NEWS

The Dow rose in choppy trade on Monday, with investors shrugging off a grim warning about the year ahead from Caterpillar.

Despite some early strength, financials ultimately turned lower in the afternoon and capped gains as investors fretted over whether the sector, which is at the heart of the credit crisis, will need to raise yet more capital.

A rare piece of good news for the recession-hit economy helped sentiment, as sales of existing U.S. homes unexpectedly jumped 6.5 percent in December.

CATERPILLAR BULLDOZED

Shares of Caterpillar tumbled on Monday after the firm announced it would cut nearly 20,000 jobs and warned of a tough year ahead as a downturn that began in the United States blossomed into a full-blown global recession, gutting orders for earth-moving equipment.

The company slashed its outlook for 2009 and seemed to raise the possibility that it would report a loss in the current quarter -- its first since 1992.

In the same space I’d keep an eye on Joy Global , counsels Pete Najarian. Options action in this stock suggests it could soon go lower.

Tim Seymour is a little more bullish on resources. He says keep an eye Freeport McMoRan and Petrobras. It could be time to put on a trade from the longside.

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AFTER HOURS ACTION: AMERICAN EXPRESS

In after hours trade shares of American Express traded as much as 3% higher after the company reported quarterly profits that were about a penny below estimates.

The firm said profit that dropped 79 percent in the fourth quarter, as cardmembers cut back on their spending amid the harsh economy.

It’s a relief rally, explains Guy Adami. It wasn’t a huge train wreck and the market likes that.

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PFIZER PLUMMETS ON 'BAD' DEAL

Shares of Pfizer plunged after the No. 1 drugmaker, said on Monday that it would acquire rival Wyeth for about $68 billion – a 20% premium - in a move to diversify its revenue base.

The deal would help Pfizer diversify into vaccines and injectable biologic medicines by adding Wyeth's big-selling Prevnar vaccine for childhood infections and Enbrel rheumatoid arthritis treatment. Pfizer would also realize major cost savings by streamlining areas that overlap

Wyeth also sells Dristan, Dimetapp and other over the counter brands. They’re basically buying a consumer brands business, muses Guy Adami.

Investors have been waiting for Pfizer to do something with their cash, but this is desperate, muses Jeff Macke.

Pete Najarian thinks there will be more acquisitions in the space. He expects Merck to go after a biotech. Keep an eye on Genentech and Crucell , he says. Both could be takeover targets.

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THAIN RESPONDS TO CRITICISM

Former Merrill Lynch Chief Executive John Thain defended the acquisition of the brokerage by Bank of America and said the bank knew of Merrill's losses and bonuses before the merger closed.

In a memo to Merrill employees, Thain also said he plans to reimburse Bank of America for $1.2 million spent to renovate his office a year ago, including $35,115 reportedly spent on commode and $1,405 reportedly paid for a trash can. He called the expenses "a mistake in the light of the world we live in today."

And in an exclusive interview with CNBC, Thain told us, “It is clear to me in today's world that it was a mistake. I apologize for spending that money on those things and I will make it right, I will reimburse the company for all of those costs.”

If we can clawback 1 million for John Thain’s office, says Dylan Ratigan, why can’t we clawback more of the money that was squandered by banks.

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WILD WEEK AHEAD

This week appears to be shaping up as a big one for markets. Not only has the dreaded earnings season kicked into full gear but there’s a Fed meeting and on top of that, the Commerce department releases 4th quarter GDP estimates.

Jon Najarian tells us that he’s riding out the uncertainty by getting long gold. “I think we could get to $1000 in gold,” he says. And he’s playing it with calls in Freeport McMoran.

In fact, the options action in gold has both Jon Najarian and his brother Pete quite bullish on this precious metal. Click here to read why.

And if you want to get face to face trading lessons from Jon Najarian go to invest-like-a-monster dot com and sign up for OptionMonster's Invest Like a Monster seminar coming up on March 7th, at the Sheraton in New York City's Times Square. Find our more at www.investlikeamonster.com




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Trader disclosure: On Jan. 26th, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (AAPL), (BAC), (EEM), (F), (FXI), (PBR); Seymour Owns A Short Position In (SNE); Seymour's Firm Owns (BIDU); Macke Owns (MS), (BAC), (SDS), (MCD); Adami Owns (AGU), (C), (BTU), (GS), (INTC), (MSFT), (NUE); Najarian Owns (EEM) Call Spread; Najarian Owns (FCX) & (FCX) Short Calls; Najarian Owns (GE) Put Spread; Najarian Owns (MSFT) & (MSFT) Short Calls; Najarian Owns (MS) & (MS) Short Calls/Put Spread; Najarian Owns (PALM) Calls

J. Najarian Owns (CAT) Short Positions; J. Najarian Owns (FCX); J. Najarian Owns (WFC) Calls; J. Najarian Owns (GLD)

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