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Stocks [.SPX
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] surrendered earlier gains and fell modestly on Tuesday largely due to fresh worries that major banks may need to raise more money. Also concerns about the spreading swine flu provided an added drag.
Banks [XLF
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] led the way down after preliminary stress test results showed Citigroup [C
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] as well as Bank of America [BAC
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] may need to raise more money in order to survive. In fact, the shortfall at BofA amounts to billions of dollars the reports said.
Those reports seem to confirm comments made by FDIC Chair Sheila Bair on CNBC in which she said that some banks could be in trouble.
Strategy Session with the Fast Money Traders
The market is moving sideways right now, explains Guy Adami. We’re probably stuck in a range – but that’s not a bad thing. We could be building a base. I think it’s okay to raise your stop-loss levels.
Considering the run that we’ve had I think sideways is extraordinary, muses Karen Finerman. A little consolidation isn’t surprising to me.
I’m still worried about the swine flu, muses Tim Seymour. The world economy is very delicate and this is the last thing we need.
Don’t be fooled, adds Pete Najarian. Volatility [VIX
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] is down from all time highs, but it’s still relatively high. That suggests there’s still fear in this market.
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HARDEST HIT SWINE STOCKS REBOUND
It seems some of the swine flu losers from Monday are already starting to bounce back. As Fast Money Series Producer John Melloy notes in his blog, Smithfield [SFD
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] has popped significantly, likely on the realization that you simply can't get the pig flu from eating pork.
Royal Caribbean [RCL
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] as well as the airlines and others that were to suffer from lower travel demand, are also now higher.
If you’re looking for swine flu plays, I think Smithfield still has upside but Marriott [MAR
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] is a sell, says Adami.
I’d look at Perdigao [PDA
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], adds Tim Seymour. It’s one of the biggest poultry providers in Latin America.
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TOPPING THE TAPE: BIG BLUE BOOSTS PAYOUT
Shares of IBM [IBM
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] edged higher on Monday after the company’s board raised its dividend by 10 percent and authorized an additional $3 billion worth of share buybacks, underscoring the technology company's relative strength even in a weak economy.
Big Blue said it would begin paying a quarterly dividend of 55 cents per share, up from the previous 50 cents. It is the 14th year in a row that the company has raised its dividend
Historically IBM has traded at a 12 multiple, says Guy Adami. I think it should be a $120 stock. In my book it’s a buy.
And IBM has a ton of cash, reminds Pete Najarian. They have the flexibility to make an acquisition.
I’m hoping they took a look at Emulex [ELX
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], chuckles Karen Finerman, which I own.
And if you’re looking for an Internet trade keep an eye on Baidu [BIDU
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], says Pete Najarian. It’s moving lower on news that rival Google wants larger market share in China.
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TOPPING THE TAPE: BP
British oil company BP [BP
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] closed in positive territory despite a 62 percent decline in profits. Their numbers beat forecasts and investors also liked hearing the firm was slashing costs.
The overall positive results raised expectations that rivals including Exxon Mobil [XOM
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] may also beat expectations when they report earnings later this week.
I like what’s happening with the big integrated names, muses Pete Najarian. And on a side-note I’m keeping an eye on Shaw Group [SGR
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]. Options action suggests there’s a lot of excitement in that space.
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OPTIONS ACTION: VERTEX CLIMBS HIGHER
Pete Najarian has spotted some unusual options activity.
The Pit Boss speculates that call buying in Vertex Pharma [VRTX
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] could mean it’s a takeover target -- with JNJ [JNJ
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] rumored to be sniffing around.
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NICE HAUL: CHESAPEAKE CEO GETS $112 MLN
The Wall Street Journal reports that Chesapeake Energy [CHK
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] and its directors are under fire from shareholders for paying Chairman and Chief Executive Aubrey McClendon $112 million last year even as the company's stock price tumbled.
The compensation package, one of the largest for any corporate executive last year, included a one-time $75 million bonus, a $975,000 base salary, and $32.7 million in stock, according to the company's proxy statement.
Lawsuits are already being filed. The Louisiana Municipal Police Employee Retirement System, which owns 85,000 shares in the company, is seeking to force open Chesapeake's books and determine the reasons behind the award. A hearing is scheduled in Oklahoma County District Court for May 26.
Karen Finerman doesn’t get ticked off easily but Chesapeake has managed to do it. She finds the company’s actions egregious.
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Trader disclosure: On Apr. 28th, 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); Finerman's Firm Owns (AXP), (RIG), (UNH), (TBT); Finerman's Firm Owns (BAC) Preferred; Finerman's Firm Owns (C) Preferred; Finerman's Firm Owns(MSFT) & (MSFT) Put Spread; Finerman’s Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO); Najarian Owns (BX) Call Spread; Najarian Owns (BP); Najarian Owns (DNDN) 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 (ORCL) Call Spread; Seymour Owns ( AAPL), (BAC), (EEM), (FXI), (PBR); Seymour Is Short (X)
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