STOCKS RISE AFTER ENCOURAGING MIDDAY REVERSAL
Stocks rallied on Thursday on hopes that the government's plan to shore up the financial system could include a change in accounting rules that would stem bank write-downs and spark lending.
Also, a solid January sales report from Wal-Mart , coupled with better-than-expected reports from a few other retailers added to the positive tone. In fact Wal-Mart was the top boost to the Dow .
There was also encouraging news on the earnings front on Thursday. Akamai , whose technology helps companies run websites and online businesses, posted a quarterly profit and revenue above Wall Street expectations.
Investors also snapped up shares of tech bellwethers Apple and Cisco Systems , reasoning that a loosening up of lending would boost both consumer and business spending.
Also, banking shares closed higher after Sen. Christopher Dodd (D-CT) said it might be possible to modify mark-to-market accounting without walking away from the standard all together.
Meanwhile, Treasury Secretary Timothy Geithner and other top officials are putting the finishing touches on a plan to overhaul the government's $700 billion financial rescue program. Geithner is expected to outline the new plan, Monday.
Strategy Session with the Fast Money Traders
The turn in the market was pretty incredible, says Pete Najarian. It think it was largely due to the talk about getting rid of mark-to-market.
Keep an eye on Bank of America, counsels Karen Finerman. The yields suggest it’s either going to $0 or it’s going to take off.
I think you can get long Bank of America at current levels, counsels Guy Adami. Look for a $6 handle and then take the trade off.
Turning attention to Europe, Deutsche and UBS still seem to be in a lot of trouble, reveals Tim Seymour.
TOPPING THE TAPE: COMMODITY STOCKS
Commodity stocks such as Freeport McMoRan and BHP Billiton appear to rolling higher; largely due to higher metal prices. Investors are speculating that we’ve reached the bottom in the global economy.
Iron ore, steel and copper are driving the run, explains Tim Seymour. I like FCX as well as Vale . And in the ag space look at Agrium , Mosaic and Potash, he counsels. Those three names look great to me.
It seems to me the reflation trade is coming back into vogue, adds Guy Adami. I can’t tell you if it’s the right trade but it appears people are putting money into ag.
I also like both Freeport McMoRan and Mosaic, adds Pete Najarian.
CISCO SWINGS HIGHER MIDDAY
Despite a disappointing forecast, Cisco shares shook off negative sentiment and closed in positive territory. Elsewhere in technology shares of Dell dropped after JPMorgan downgraded the company to ‘Underweight’ from ‘Neutral.’
Cisco shares took a big hit after CEO John Chambers made some negative comments on the call, explains Pete Najarian. But they have $30 billion in cash and that makes it a company I want to own.
I agree, adds Guy Adami. I like this stock.
Plus look at Dell, adds Najarian. The stock went lower in a positive tape.
BOTTOM IN FOR RETAILERS?
Retailers including Wal-Mart and Macy's turned in better-than-expected sales for January. Wal-Mart's sales beat Wall Street's forecast after the chain drew shoppers focused on necessities like groceries. Macy's, which this week said it would slash 7,000 jobs, on raised its fourth-quarter and full-year forecasts after reporting its sales.
The debt in Macy’s is priced as if the company is heading for bankruptcy, counsels Karen Finerman. Yet the stock goes higher. It’s a huge disconnect. The same is true for Sears and JC Penney. I might look to go long some of the debt and short the equity on Macy’s, she says. But don’t short Sears, or you could get caught in a short squeeze.
I’d look at Dollar Tree, adds Pete Najarian. I see room to the upside and it could be a buy on this dip.
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DRUG STOCKS KEEP ROCKING
Drug stocks are continuing their strong run with the Health Care SPDR ETF now up almost 2% this year. Meanwhile, GlaxoSmithKline made gains after hours largely due to jobs cuts and a new round of restructuring.
I think the dynamics making drug stocks go up is still very much in place. I’m playing it with 3 ETFs, the XBI, IBB and a little PPH , says Karen Finerman
I also like the XBI, adds Pete Najarian.
I’m hearing that Procter & Gamble is looking for potential buyers of its pharma brands, adds Guy Adami. That’s something to keep an eye on!
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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); Finerman Owns (PAL), (MSFT), (BAC); Finerman's Firm Owns (DNA) & (DNA) Calls; Finerman's Firm Is Short (IYR), (IJR), (IWM), (MDY), (SPY), (USO); Najarian Owns (CAT) Call Spread; Najarian Owns (EEM) Call Spread; Najarian Owns (FCX) & (FCX) Calls; Najarian Owns (ENER) & (ENER) Call Spread; Najarian Owns (GDX) Call Spread; Najarian Owns (MSFT) & (MSFT) Short Calls; Najarian Owns (MS) & (MS) Short Calls; Najarian Owns (MOS) Call Spread; Najarian Owns (DLTR) Calls; Najarian Owns (PALM) Calls; Seymour Owns (BAC), (EEM), (FXI), (MOS), (PBR), (CBRE)
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