S&P Falls Below 800 Level
S&P FALLS BELOW 800 LEVEL
The S&P tumbled on Monday largely due to concerns about the major automakers after the White House made some extraordinary moves included forcing out GM’s CEO, pushing Chrysler toward a merger and threatening bankruptcy for both.
GM CEO Rick Wagoner, who presided over the company's rapid decline in the past five years and had run the automaker since 2000, was forced out at the request of the government's autos panel headed by former investment banker Steven Rattner.
GM shares slid while shares of supplier companies also fell sharply as investors worried that a potential bankruptcy would send ripple effects through the entire supply chain.
President Obama tried to soothe investor nerves by saying the government did not want to run GM, but added that Wagoner's departure reflected the company's need for a new direction.
Rival automaker Chrysler, owned by Cerberus Capital Management, a private equity company, said it had reached an agreement on Monday for an alliance with Fiat.
Strategy Session with the Fast Money Traders
From a technical perspective it seems to me we’re in no man’s land now, muses Guy Adami. I think the S&P pushes lower, down to 741. But if we do get to that level then I think the market is off to the races again.
It seems to me the market had a big run and it was looking for any excuse to go down, adds Karen Finerman.
I totally agree with Karen, echoes Tim Seymour.
The fact that we saw a broad based pull back was also telling, explains Pete Najarian. It’s different from a pull back that's led by only one sector. Investors wanted to take gains.
FINANCIALS FALL AGAIN
The financials slid on Monday after Treasury Secretary Timothy Geithner said some American banks still need large amounts of help. Also investors grew nervous after Spain, Germany and Britain acted to boost banks struggling with rising bad loans, overseas.
"The biggest concern is what happens with the banks and do we have another round of losses to be realized, and I think that's what's taking the market down today," says Jim McDonald, chief investment strategist at Northern Trust in Chicago.
"The financials still have major, major issues," adds Bill Strazullo, partner and chief investment strategist at Bell Curve Trading in Boston. "There are a lot of problems there that aren't going to go away any time soon. These banks are going to continue to require assistance from the government."
Also, some investors speculated that Geithner had tipped his hand concerning the government implemented stress tests, explains Tim Seymour, but I don’t think that’s the case.
If you’re looking for a trade in this space I’d look at Northern Trust and Visa , says Pete Najarian. They’ve both been brought up as possible replacements in the Dow if Citigroup and/or Bank of America is removed.
And also keep an eye on Wells Fargo , Najarian adds. There was a lot of put buying in this stock.
STEEL NAMES SLAMMED
In another sign of global economic slowdown UBS said steel use was down 50% in 2009 and they expect to see pressure on pricing continue well into 2010.
I think the bigger issue in this space is the balance sheet, says Tim Seymour. Steel companies have a lot of debt.
I’d keep an eye on Freeport McMoRan , says Pete Najarian. If copper goes higher this stock could go too.
Be careful, in the short term, Freeport could go down to $36, counters Tim Seymour.
If you’re looking for a long-side trade Nucor is probably it, adds Guy Adami.
TOPPING THE TAPE: PHARMA
Share of Eli Lilly closed lower after the firm announced inconclusive clinical trial results for an experimental drug to treat schizophrenia. However the drug maker added that inconclusive results were common in the field of neuroscience.
In the space I’m keeping an eye on Lilly for acquisitions, says Pete Najarian. Amylin is always a name that comes up. And for options action I’ve got my eye on Humana. Lots of call buying in that stock.
In the space I prefer Abbott Labs, adds Guy Adami.
AG NAMES WILT
Ag names wilted on Monday after Soleil Securities downgraded Mosaic and Potash to ‘Hold’ from ‘Buy'. Meanwhile, Credit Suisse lowered its estimates on Deere citing concern about demand for farm equipment.
I think there will be a time to buy these stocks, says Guy Adami, but the time isn’t now.
I find the ag space interesting, adds Pete Najarian. For example CF Industries rejected a takeover bid saying it was too low.
Najarian is referencing a decision made by CF Industries Holdingsto reject Agrium’s revised takeover offer of about $3.8 billion.
In a statement late on Sunday, CF said its board concluded that Agrium's offer is "grossly inadequate", substantially undervalues the company and is not in the best interests of the company and its shareholders.
THROW TRANSPORTS FROM THE TRAIN
It seems Goldman Sachs can’t decide whether it’s coming or going. Goldman upgraded Burlington Northern to ‘Buy’ from ‘Neutral,’ yet downgraded Union Pacific to ‘Neutral’ from ‘Buy’.
BNI is a Buffett name that’s been beaten down, explains Pete Najarian.
CHESAPEAKE APPROVES MASSIVE BONUS
Chesapeake Energy board of directors awarded a $75 million incentive payment to chief executive Aubrey McClendon and lowered the number of company shares he is required to own, according to a regulatory filing on Wednesday.
The change will allow McClendon time to rebuild his stake after a margin call forced him to sell more than 31 million shares in October, the filing with the U.S. Securities and Exchange Commission said.
The $75 million is to offset drilling costs in oil and gas wells he jointly owns with the company.
I think it’s outrageous, says Karen Finerman. And if you’re a shareholder you should be outraged too!
McClendon should step up and say thank you but no thank you, adds Guy Adami.
OIL FALLS BELOW $50
Oil dropped by more than 7 percent to below $49 a barrel on Monday, weighed down by the stronger U.S. dollar and weaker stock markets.
U.S. oil for May delivery settled at $48.41 a barrel, down $3.97. The contract fell $1.96 to settle at $52.38 a barrel on Friday, pulling back from Thursday's four-month high.
Meanwhile, London Brent crude settled at $47.99 a barrel, down $3.99.
"The weaker stock market, the stronger dollar -- those are the two main factors in crude's big fall Monday," explains Phil Flynn, an analyst at Alaron Trading in Chicago.
What's the trade?
Joe Terranova tells the desk "don't get short, that's not the trade."
He thinks the retracement is normal and says if the S&P falls to 735 it would be a good time to get long stocks in the sector. "I like Exxon Mobil as well as ConocoPhillips."
I'd look at Tenaris, adds Tim Seymour.
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Trader disclosure: On Mar. 30th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Finerman's Firm Owns (MSFT), (RIG), (AXYS); Finerman's Firm Owns (BAC) Preferred; Finerman's Firm Is Short (IJR), (IWM), (MDY), (SPY), (USO), (BBT); Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Seymour Owns (AAPL), (BAC), (FXI), (EEM), (TTM); Najarian Owns (AAPL) Call Spread; Najarian Owns (BNI) Call Spread; Najarian Owns (GS) Call Spread; Najarian Owns (HUM) Call Spread; Najarian Owns (MS) Call Spread; Najarian Owns (PALM) & (PALM) Calls; Najarian Owns (POT) Call Spread; Najarian Owns (XHB) Call Spread; Najarian Owns (RIO) Calls
Terranova Owns (XOM), (HES), (JPM), (X), (DELL), (INTC); Terranova Owns (COP) Calls
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