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Both the Dow [.DJIA
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] and S&P 500 [.SPX
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] dipped on Tuesday as cautious investors cashed out ahead of bank stress test results, which may show about half of the 19 biggest banks under review need to raise more capital. Despite the drop, the S&P 500 remains positive the year, if only by a scant 0.06%.
Federal Reserve Chairman Ben Bernanke did however offer the market some nuggets of optimism. Testifying before Congress he said the U.S. housing market may be near a bottom and that he expects a modest economic recovery with the recession ending this year, barring a relapse of the financial crisis.
Strategy Session with the Fast Money Traders
Stocks are a leading indictor and they’ve been seeing the recovery for about the past two months, explains Guy Adami. As far as I’m concerned the market is way ahead of Bernanke.
Options action in the XHB [XHB
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] September 17 calls suggests to me big investors are betting on stabilization in the housing sector, perhaps on Bernanke’s comments. Also I noticed a late day surge in copper, again a potential reaction to Bernanke’s testimony.
There was some downside too, reminds Tim Seymour. Bernanke also talked about shoes that haven’t fallen in the commercial real estate area and as a result regional banks such as Fifth Third [FITB
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] took a hit.
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BANKS DOWN BEFORE STRESS TESTS
About 10 large US banks, including Citigroup [C
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] and Bank of America [BAC
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] could need to increase their capital under a government stress tests, the Wall Street Journal reported Tuesday.
Meanwhile, JPMorgan CEO Jamie Dimon says he expects most firms will release the results of the U.S. government's stress tests to shareholders on Friday. "I have been informed that they (U.S. regulators) will be making their announcement on Thursday, so I think a lot of firms will be announcing to shareholders the proper information on Friday," Dimon told a news conference.
As far as I’m concerned these stress tests are as phony as the three dollar bill, bristles Jeff Macke. I’m long Wells Fargo [WFC
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] and Goldman [GS
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] but only as best of breed plays.
I’d look at Fortress [FIG
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] and Blackstone [BX
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], adds Pete Najarian.
I like Fortress too, concurs Guy Adami.
Or check out Legg Mason [LM
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], counsels Tim Seymour. And for an international play check out Banco Itau [ITU
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] in Brazil.
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AFTER HOURS ACTION: DISNEY
After hours Disney shares [DIS
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] jumped more than 4 percent after the company beat Street expectations, albeit with a lower quarterly profit.
Disney said revenue from its parks and resorts declined 12 percent to $2.4 billion. Its studio entertainment revenue tumbled 21 percent to $1.4 billion.
Disney's consumer products revenue increased, however, rising 9 percent to $496 million.
"We had a difficult second quarter due to the weak economy and other factors," said Disney President and CEO Robert A. Iger. "At the same time, we remain focused on our core business strategy and believe our creativity, brands and businesses will serve us well as the economy recovers."
What's the trade?
I didn’t find Disney earnings all that compelling, muses Guy Adami. I think the stock at these levels is ahead of itself. I’d take profits.
I wouldn’t chase this stock either, counsels Pete Najarian, but on a pull back I like it.
Two words -- boulder and dash, bristles Jeff Macke.
After listening to the conference call, Joe Terranova is very excited about Disney, largely because he finds CEO Bob Iger focussed on monitizing Disney's online exposure.
It's clear to me they are looking at the future and they understand online entertainment is what the younger genertaion wants, he says.
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AFTER HOURS: DOW CHEMICAL
After hours Dow Chemical [DOW
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] said it had commenced a public offering of its common stock to raise about $1.63 billion as it works to pay down the hefty debt load incurred with its acquisition of Rohm and Haas.
About $1 billion of the total will be raised through shares offered by the company, Dow said in a statement.
Historically, sizable secondary offerings like this have presented a monster opportunity to buy the stock, counsels Guy Adami.
I like it too, adds Tim Seymour. It gives them more breathing room.
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TOPPING THE TAPE: WYNN JUMPS AFTER EARNINGS
Shares of Wynn [WYNN
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] climbed on positive comments from CEO Steve Wynn who said he was "cautiously optimistic that maybe we've seen the bottom" of the recession-driven downturn. "We've been noticing that the weekends are getting very strong again," he said on a conference call with analysts and investors.
Still, the casino mogul cautioned that the near-term future for Las Vegas hinges on the success of efforts in Washington to jump-start the stalled economy.
Although Wynn swung to a loss,Tuesday results beat expectations.
I trimmed my casino position a little, explains Jeff Macke. Las Vegas Sands [LVS
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] was up 20%; And I hope if you were in it, that you took some gains, too.
On a pull back I still think LVS is a buy, counters Guy Adami.
I’ve got my eye on Boyd Gaming [BYD
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], adds Pete Najarian. It’s had a screaming run but it continues to go higher.
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Trader disclosure: On May 5th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (AAPL), (PCLN), (LVS), (SDS), (GE), (NFLX), (IMAX), (GS); Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Seymour Owns (AAPL), (BAC), (BX), (RIO), (SBUX); Najarian Owns (BX) Call Spread; Najarian Owns (DFS) Calls; Najarian Owns (ERTS) Calls; Najarian Owns (FIG); Najarian Owns (MCD) And Is Short (MCD) Calls; Najarian Owns (MS) And Is Short (MS) Calls; Najarian Owns (PALM) And Is Short (PALM) Calls; Najarian Owns (XLI) Call Spread; Najarian Owns (XHB) Call Spread
Terranova Is Long (DIS) October Calls; Terranova Works For (VRTS); Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.; Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO
Virtus Diversifier PHOLIO Owns (IGE), (DBC), (DBV)
Virtus Investment Partners Owns More Than 1% Of (ABD), (ARE), (CAL), (DLR), (EPR), (EXR), (IGE), (MEE), (DBC), (DBV), (DBA), (SKT), (UA), (CLB), (WBMD); Virtus Investment Partners Owns More Than 1% Of St Mary Land & Exploration Co; Virtus Investment Partners Owns More Than 1% Of Seagate Tax Refund Rights
GE Is The Parent Company Of CNBC
NBC Universal Is The Parent Company Of CNBC
Charles Schwab Is A Sponsor Of "Fast Money"
CNBC.com with wires
Data is a real-time snapshot *Data is delayed at least 15 minutes