STOCKS CAN'T SHAKE SWINE SCARE
Concerns that the recent outbreak of swine flu could reach pandemic proportions dragged down the Dow and S&P Monday with investors hammering airlines, hotels and other names.
Strategy Session with the Fast Money Traders
I don’t put a lot of emphasis on the swine flu, says Guy Adami. We’ve been trading sideways for a while and that’s what I expect until further notice. But if you want a short, look at Marriott.
The S&P just can’t break above 870, adds Jeff Macke. We just keep bouncing off that point of resistance. Until we can break through it convincingly I’m a seller of stocks as we approach that level.
It seems to me that the market was looking for a reason to sell, muses Karen Finerman. And with the swine flu, they found it. But I think it's a tempest in a pot of tea. I’m looking at Grupo Aeroportuario del Pacifico , a firm that operates airports in Mexico. It could be time to get long.
We’re in consolidation mode, agrees Pete Najarian. But I really think it’s an over reaction.
SWINE FLU: BIOTECH
Baxter , GlaxoSmithkline, Crucell and Gilead all made gains on the potential that they could benefit from swine flu vaccines and treatments.
GlaxoSmithKline and Roche both have anti-viral medications, explains CNBC’s Pharma reporter Mike Huckman. They’re ready to go. But these are short term trades. The swine flu is not a reason to own any of these stocks, long-term.
Huckman also tells the traders that Dendreon may have a revolutionary form of therapy for one of the most common cancers. On Tuesday we'll know more when the firm reveals results of an experimental medicine that has improved survival in men with advanced forms of prostate cancer. The results could bolster chances of it becoming the first approved therapeutic vaccine for any type of cancer.
SWINE FLU: TRAVEL
Investors bid shares of Southwest , Marriott and Royal Caribbean as well as many other travel and leisure firms lower after Spain became the first country in Europe to confirm a case of swine flu. (Fortunately, that case was much like the 20 identified in the United States and 6 in Canada – not serious.)
SWINE FLU: FOOD SUPPLY
Fears that pork products may trigger swine flu dragged down shares of Smithfield Foods and Tyson Foods . It's worth noting that according to the CDC, people cannot get the flu from eating pork or pork products
For a trade I’d look at Smithfield but not for swine flu – as a possible takeover target, counsels Guy Adami.
There’s been a lot of options action in Smithfield, adds Pete Najarian. Adami might be onto something.
SWINE FLU: OTHER
JPMorgan on Monday wrote that "concerns over the swine flu outbreak could weigh on MasterCard and Visa shares due to fears that cross-border fees may suffer from reduced cross-border travel."
It added that although it was too early to speculate on the impact of the flu, "the risk is worth monitoring in our view."
I think MasterCard and Visa are both in no-man’s land right now, says Guy Adami.
GLOBAL ECONOMY DERAILED?
Oil prices fell more than 3 percent to below $50 a barrel as investors feared the swine flu could pose a new blow to an already fragile global economy if trade flows are curbed and manufacturing is hit.
Copper also took a hit for similar reasons. Meanwhile, Mexico’s peso dropped nearly 3% against the U.S. dollar, with the dollar gaining against a broad basket of currencies on its safety appeal.
Looking globally I’d rip a page out of the playbook from when SARS hit, counsels Tim Seymour on Fast Money's Halftime Report. At that time metals were really bid lower. However, in the long run the price action was overstated. I think the same could be true again. That suggests nickel and platinum could be buys right here, he says.
GM – RARE SHOW OF STRENGTH
GM shares surged on Monday after the troubled automaker announced a sweeping restructuring that investors hoped would keep the company alive as it tries to secure government funding.
Fritz Henderson, the new GM CEO tells CNBC, “We think it's a very aggressive plan. (It) develops a break even point for example at about 10 million units here in the US which would be a very robust level of break even for a company of our size, so we think it's suitable in terms of both being aggressive and being fast.”
I think the action in GM Monday was a short squeeze, muses Karen Finerman. I’d stay away from it.
GM is still a lottery ticket, adds Guy Adami. Trade at your own risk. If you’re looking for an auto play, look at Borg Warner.
TOPPING THE TAPE: CORNING
Investors bid shares of Corning higher after earnings from the specialty glassmaker topped Wall Street expectations on a mid-quarter rebound in demand for its flat-screen television glass.
The world's largest maker of liquid-crystal-display glass earned $14 million, or a penny a share, in the January-March quarter, down from $1.03 billion, or 64 cents a share, a year earlier.
I wouldn’t pile into this stock at current levels, says Guy Adami.
In the space I’m watching Ciena , adds Pete Najarian. Options volume was extreme on Monday.
WELLS FARGO DRAGS FINANCIALS LOWER
Wells Fargo dragged banks lower after analyst Dick Bove suggests WFC may be overextended. Meanwhile shares of Citigroup and Bank Of America traded lower ahead of the stress test results.
$22 has been resistance in WFC, explains Guy Adami. At current levels this stock is a short. Or sit on the sidelines and wait for an entry point which I think is $18.75.
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Trader disclosure: On Apr 27th, 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 (SDS), (WFC), (AAPL), (GE), (AGN); Finerman's Firm Owns (RIG), (UNH), (TBT), (ELX); Finermans Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO); Finerman's Firm Owns (AXP); Finerman's Firm Owns (BAC) Preferred; Finerman's Firm Owns (C) Preferred; Finerman's Firm Owns(MSFT) & (MSFT) Put Spread; Najarian Owns (BX) Call Spread; Najarian Owns (INTC) Call Spread; Najarian Owns (MS); Najarian Owns (PALM); Najarian Owns (RHT) Calls; Najarian Owns (RIO) Calls; Najarian Owns (XHB) Cal Spread; Najarian Owns (XLB) Call Spread; Najarian Owns (RF); Najarian Owns (HES) Calls; Najarian Owns (CIEN) Call Spread
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