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PROFIT GLOOM AND BANK CONCERNS DRAG DOW LOWER
The Dow [.DJIA
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] fell on Wednesday after a glum profit forecast from Kraft [KFT
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] signaled consumers are skimping even on the basics.
"Consumer spending is the lion's share of the economy," says Anthony Conroy, head trader for BNY ConvergEx. "When consumers stop spending, the economy comes to a halt."
Also dragging down stocks was the nagging worry government efforts to rescue banks could wipe out some shareholders, entirely.
On the bright side, data from the Institute for Supply Management showed the service sector, which represents about 80 percent of U.S. economic activity, shrank less than expected in January, welcome news for investors. That helped the Nasdaq [.NCOMP
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] to finish near break-even.
WILL CISCO SPARK RALLY TOMORROW?
Shares of Cisco [CSCO
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] climbed modestly after hours on surprisingly bullish earnings news before settling again. Although the company reported a profit that fell from last year, both its earnings and sales performance beat Wall Street forecasts.
There’s good tech names and bad tech names, explains Pete Najarian. Personally, I like Cisco’s cash position. If you’re looking for a tech play, I’d look at this name.
Around $15 Cisco looks interesting to me too, muses Guy Adami.
Cisco is a very well run but they say nothing about the rest of the economy because they’re a unique animal, counters Jeff Macke.
It’s worth noting that later in the show CNBC’s Jim Goldman tells the panel that he found the tone on the conference call more negative than anything else. He says CEO John Chambers, who is typically very optimistic, was anything but optimistic about business in the year ahead.
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AFTER HOURS ACTION: VISA
Visa [V
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] shares surged in extended trading Wednesday after the company reported fourth-quarter earnings that easily beat analyst estimates.
They’re debit card business is very strong, explains Karen Finerman. I think strength in Visa could bode well for Mastercard [MA
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] which comes out Thursday.
Guy adami concurs. These numbers should bode well for Mastercard.
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GOLDMAN RISES DESPITE OBAMA'S PAY CAP
Goldman Sachs [GS
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] was among the few banks that finished in positive territory after President Obama imposed a $500,000 cap on senior executive pay for any bank accessing TARP money. The move is widely seen as the first step toward increased regulation for banks needing assistance.
Many other bank shares plunged, including Bank of America [BAC
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] which capped a fifth straight day of declines and touched a 19-year low during the session.
Of particular concern is that the plan could wipe out current stockholders, traders say. The Obama administration is due to make an announcement on its bank rescue plan next week.
I found it interesting that after the news, Goldman said they would quickly pay back the TARP money, presumably so they won’t be affected by the restrictions, muses Karen Finerman
Forget the rhetoric, I’d like to see the President appoint an investigator to pursue wrong-doing in the banking sector, adds Dylan Ratigan.
If you're looking for a trade, I’d keep an eye on Goldman [GS
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] and Morgan [MS
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], counsels Pete Najarian. And I can’t help but wonder if Wells Fargo [WFC
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]has more downside.
I think Bank of America [BAC
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] is starting to look interesting, adds Finerman. It’s either going to $0 or it’s up 400% in a few years. But if you go into this stock, make sure you’re aware that you could lose everything.
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TOPPING THE TAPE: COPPER LEADS COMMODITY REBOUND
Copper minters Freeport McMoRan [FCX
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] and Rio Tinto [RTP
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] both closed higher as copper [US@HG.1
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] made gains for the second consecutive day. The shiny metal is now up over 9% for the year.
In this space, I’d keep an eye on copper, steel and also ag names. Some companies are showing strength in a weak tape. But I wouldn’t chase them, wait for a pull back.
Copper had gotten absolutely crushed, adds Karen Finerman. It seems to have bottomed for the near-term.
I’d keep an eye on gold [US@GC.1
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], adds Guy Adami. The action looks bullish to me.
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BUFFETT'S TIME TO BUY?
Fortune magazine says that according to Warren Buffett, U.S. stocks are a 'buy' when their total market value equals 70% to 80% of gross national product. Right now, we're at 75%. The peak was back in March 2000, when this measure was at 190%.
That makes sense to me, says Guy Adami.
I hate to be cynical but Warren Buffett has not bought one share of common stock that you can buy alongside him, counters Jeff Macke.
I’d keep an eye on Burlington Northern [BNI
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], counsels Pete Najarian. Buffett likes this stock and so do I.
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Trader disclosure: On Feb. 4th, 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); Macke Owns (TM), (DIS), (MS), (SDS), (AAPL); Finerman's Firm Owns (DNA) & (DNA) Calls; Finerman's Firm Owns (MSFT), (PM); Finerman's Firm Is Short (IYR), (IJR), (IWM), (MDY), (SPY), (USO), (BBT); Najarian Owns (BMY) Calls; Najarian Owns (CSCO) Call Spread; Najarian Owns (CAT) Call Spread; Najarian Owns (EEM) Call Spread; Najarian Owns (FCX) & (FCX) Calls; Najarian Owns (GDX) Call Spread; Najarian Owns (MSFT) & (MSFT) Short Calls; Najarian Owns (MS) & (MS) Short Calls; Najarian Owns (V) Call Spread
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