S&P Falls 8.6% in January
The US stock market suffered its worst January ever, with record percentage losses for the month coming on almost every major index. Stocks followed the month’s trend by falling sharply Friday when uncertainty about the government’s “bad bank” plan sent waves through the market.
Karen Finerman points out that stock performance in January can’t be used as an indicator of 2009 as a whole. “Things are moving so quickly” she says, “it’s hard to extrapolate. If you extrapolate this, there is no market value at the end of the year.”
With several big numbers coming out – GDP, the PCE price index and Consumer Sentiment, what can we make of the economy as a whole right now? Guy Adami sees the confidence of the consumer as damaged, with people becoming disinterested in putting their money into the stock market. He thinks the market has been reacting to the downside as a result of decreased clarity for future government plans. On the upside, Adami sees some variation of the “bad bank” plan coming to fruition to begin to ease concerns.
As for some specific picks, Pete Najarian is putting his money on the Arizona Cardinals to win the Super Bowl. As for the stock market, based upon the presence of so many unknowns, Najarian sees sentiment improving slightly, with some numbers coming out better than expected. Are we at a bottom? Not yet, but he thinks confidence may be on the rise.
Throw in the fact that more and more firms have decided to forego delivering guidance, this opens up an interesting discussion on the implications of such decisions. In a time when people are thirsting for economic clarity, this sounds like another shot in the arm to investors. Not so, says Karen Finerman, the CEOs who are abandoning guidance will be better able to manage for the long term, instead of meeting short-term expectations.
Finerman also points out that the CBOE Volatility index is still well below the levels of October and November, which demonstrates that in the midst of bad economic data, we are fortunately without other elements of the markets which caused unpredictable swings.
Bad Bank Plan Hitting a Snag?
Karen Finerman points out that there is a lot of commercial debt coming due, and some companies will not be able to pay once it comes due. She warns that much of this debt will not be rolled over. Depending on the type of debt, this situation could put certain systems at risk. She suggests looking into the IYR and Citi to see the potential effects of the debt coming due.
Guy Adami thinks among the low hanging fruit is in Acuity Brands he suggests that it is approaching levels where the smart move could be taking some of the short positions back. But he warns that if AYI rallies again, look to short as it has the potential to go lower.
Tim Seymour looks at JPMorgan and Wells Fargo to have more exposure to delinquent loans and more bad debt in jumbo loans. He looks at these loans as targets for government intervention.
P&G Outlook Worsens This Week
Karen Finerman points out that is wasn’t as bad as it could have been for P&G. She points out that they may have problems selling their higher-end products, but P&G suffered the most from it’s valuation being too high.
Pete Najarian points out that you should be looking for efficiencies and companies that can continue to produce good numbers, even in this market. Internet names like Amazon and Overstock as they become increasingly efficient, they have taken the market by surprise, Najarian says. From a trading perspective, Najarian sees analyst targets looking up, but there may be a chance to have a pull back. If they can continue to be efficient in their pricing models, these companies will continue to make money.
Gold Jumps $20 Today
Tim Seymour says in this environment people are turning to gold and gold miners, in places like Africa, Brazil and Canada where currencies have been devalued and the dollar export price of gold remains high. Seymour likes Gold Fields in this market.
Guy Adami likes the way the price action was for Newmont Mining as the gold market has done everything right for the bulls. Both Adami and Pete Najarian agree that gold is at a break-out point. Najarian points to the and for a good, broad base across the gold miners, and well distributed.
Karen Finerman addressed the issue at length on Closing Bell’s Final Calltoday, noting some questions about the long-term negotiations between Roche and Genentech, and whether the hostile move from Roche was in order to preempt good news coming in April from Genentech. Although view is purely speculation at this point, it could forecast a “blockbuster” drug for Genentech this April, says Pete Najarian, and it might have Roche thirsting to get the deal done before then.
Biotech has a Big Week
Guy Adami highlights Celgene, above the 52 week moving average, and points out that it has performed well over the past few weeks. He looks at the company with a great, debt-free balance sheet.
Pete Najarian points to big Pharma community to be involved in stem cell research, including Merck and Pfizer
Solar Powers On
Karen Finerman is relatively bearish on SolarFun , but does not look to short it.
Pete Najarian suggests looking at solar names that find themselves above the 50 day averages. When considering trades on technicals, he sees people looking specifically at First Solar , Energy Conversion Devices and SunTech Power
Tim Seymour sees opportunity in energy with Exxon Mobil as they have been able to pull profits out of favorable refining margins. Look at their stock buyback which will be around $7 billion, and it is the best-positioned oil company in the world, says Seymour. Pete Najarian suggests buying puts on the stock to protect yourself from any downside.
The January Effect
Does a bad January mean a bad year? Every down January since 1950 has been followed by a new or continuing bear or flat market. Jeff Hirsch, editor of the Stock Trader’s Almanac gives his insight. Check out the video above for his words of wisdom!
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Trader disclosure: On Jan 30, 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 (EEM), (BMY) Calls, (FCX) & (FCX) Short Calls, (MSFT) & (MSFT) Short Calls, (MS) & (MS) Short Calls/Put Spread, (SQNM) & (SQNM) Short Calls, (GDX) Call Spread, (GE) Put Spread, (STP) & (STP) Short Calls; Seymour Owns(AAPL), (BAC), (EEM), (F), (FXI); Finerman's Firm Is Short (IYR), Short (IJR), Short (IWM), Short (MDY), Short (SPY), Short (COF),Short (USO), Owns (DNA) & (DNA) Call Spread, Owns (MSFT), Owns (UNH); Adami Owns (AGU),(C),(BTU), (GS), (INTC),(MSFT),(NUE)
Montley Fool Owns Shares of (PG)
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