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Stocks Snap 3-Day Losing Streak

STOCKS SNAP 3-DAY LOSING STREAK

Stocks ended higher Tuesday, snapping a three-day losing streak, after strong earnings from Merckand a better-than-expected housing report lifted sentiment on the Street.

Investors were also encouraged by details of a GOP counter-stimulus plan that would slash the corporate tax rate, and word from Treasury Secretary Tim Geithner that the government was about to get "very aggressive" with fiscal policy.

The session was topsy-turvy as investors digested all that against some gloomy news out of the tech sector and weak auto sales.

Strategy Session with the Fast Money Traders

The potential tax cut was probably all the reason for the gain, muses Karen Finerman. And it could get traction because the House plan seems to be slipping.

I’ve heard that over a long week-end President Obama will decide which banks get to live and which don’t, bristles Jeff Macke. If you’re trying to restore confidence in a market, that doesn’t work. I think we need a comprehensive plan, he says. It seems to me if the government is going to kill banks the market thinks Bank of America and Citigroup are already dead.

(According to Jon Najarian, Marshall & Ilsley, and Corus Bank Corp were both slammed by options traders. That suggests to him, they’re not too big to fail.)

I’m really into the tax cut plan, Najarian adds. It would keep money in consumer and corporate pockets and it should get spent. The plan makes me more bullish on stocks.

It seems to be that we’re moving toward clarity and the market likes clarity. It could spark a rally, muses Guy Adami.

Jeff Macke doesn't buy it. It seems to me the government wants to take a bad bank and stuff it down the American taxpayers throat, exclaims Jeff Macke, and then we’re going to sell the good parts to the Chinese!

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MICKEY'S MISS MAY MAR MARKET

Walt Disney shares fell steeply in late trading as the company reported a profit that was lower than last year and badly missed analysts' expectations. The results could mean a weak open on Wednesday.

Jeff Macke wasn’t surprised. They sell things to consumers, he says. It’s no bueno. I was looking for a hedge all day but the puts were too expensive.

It’s not surprising at all, echoes Karen Finerman.

I didn’t think the parks revenue was so bad, counters Guy Adami. It could be interesting for a trade if the stock holds $18.50.

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AT LEAST WE HAVE OUR HEALTH

The drug sector keeps rolling as both Merck and Schering-Plough report earnings that top Street expectations. The Health Care SPDR ETF is now positive for the year.

TOP SECTOR PERFORMERS IN 2009

Health Care +2.5%
Utilities +1.1%
Energy -1.3%
Technology -1%

I’m playing the space with the IBB and the PPH , reminds Karen Finerman.

Take a look at Amgen, adds Guy Adami. And I still love Gilead.

The options action in Intuitive Surgical suggests a trade to Jon Najarian.
> Click here to find out what it is!

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BANKS LOWER AS WASHINGTON WORKS

Shares of bank stocks closed lower as lawmakers continue to grapple with the details of the latest bailout plan. Meanwhile Citigroup said it was using $36.5 billion in taxpayer bailout money to boost lending as political pressure intensified for the bank to end a $400 million baseball stadium sponsorship deal.

Both developments reflect the U.S. government's increasing sway over Citigroup, which was once the largest bank in the world but has been weakened by more than $80 billion in writedowns and credit losses.

Also JP Morgan CEO Jamie Dimon told CNBC that instead of a bad bank he’d prefer to see government guarantees.

He said, "A much better solution in my opinion, which is somewhat based on the bad bank , is not for the government to buy the assets but rather to guarantee them and guarantee below an amount the bank has them on their books. So if the assets was originally at 100, the bank is now valuing it at 80, it would be guaranteed if it fell below 65."




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Trader disclosure: On Feb. 3rd, 2009, 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): Macke Owns (ERTS), (TM), (DIS), (MS), (SDS): Macke Owns (ERTS) Calls: Finerman's Firm Owns (DNA) & (DNA) Call Spread: Finerman's Firm Owns (MSFT), (TYC), (IBB), (XBI), (TBT): Finerman's Firm Is Short (IYR), (IJR), (IWM), (MDY), (SPY), (USO), (BBT): J. Najarian Owns (WFC) Preferred; J. Najarian Owns (BAC) Preferred; J. Najarian Owns (C) Preferred; J. Najarian Owns (FCX) & (FCX) Long Calls; J. Najarian Owns (GDX); J. Najarian Owns (JPM) Preferred; J. Najarian Owns Gold Futures; J. Najarian Owns (ISRG) Call Spread

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