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Despite reports that stress test results, released Thursday, will show banks need to raise billions more -- both the Dow [.DJIA
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] and the S&P [.SPX
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] closed positive for the day.
In fact, the shortfalls are said to be much larger than expected, but that didn’t seem to bother investors. Shares of major banks advanced, sending the KBW Bank Index [BKX
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] surging.
Among banks expected to need capital, Bank of America [BAC
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], Citigroup [C
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] and Wells Fargo [WFC
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] all soared for the day.
Although it seems counterintuitive, "the market likes the certainty of putting numbers on the worst-case scenarios of how much capital these banks need," explains Chris Armbruster, an analyst at Al Frank Asset Management.
Strategy Session with the Fast Money Traders
It’s a head scratcher, muses Karen Finerman. If we had seen this very same news a few months ago it would have sent the market into a tailspin.
Sheila Bair gave traders their playbook, counters Pete Najarian. She said the stress test results would give us confidence in the banks and that’s exactly what’s happening.
It seems to me that long-only money is buying banks because investors can now hold these stocks with confidence, muses Tim Seymour.
If you're holding bank stocks I’d trim my position, bristles Jeff Macke. There’s no way Wells Fargo should jump 20% in one day. If you’re buying today you’re playing this market backward.
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MORGAN STANLEY'S CAPITAL NEEDS
Late word from the WSJ suggests that stress tests results found Morgan Stanley [MS
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] needs to raise an additional $1.5 billion. Earlier reports suggested that they didn't need to raise anything.
This news isn’t going to break this stock, explains Jeff Macke. It’s a relatively small number.
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AFTER HOURS ACTION: CISCO
Cisco [CSCO
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] climbed in extended trade after the firm reported a profit and revenue that sank from last year but handily beat analysts' forecasts.
The computer networking giant said it earned 30 cents a share in its fiscal third quarter, compared with a per-share profit of 38 cents a share in the same period last year.
I think the third quarter was completely priced into this stock, explains Tim Seymour, so it’s all about the forecast. However, CEO John Chambers is saying he’s seeing stabilization going forward, which could be bullish.
I'd be careful here, counters Pete Najarian. I think the stock is a little ahead of itself.
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TOPPING THE TAPE: OIL HITS 6-MONTH HIGH
U.S. crude oil futures [US@CL.1
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] settled at their highest levels in five months on Wednesday as a drawdown in gasoline supplies and a smaller-than-expected rise in crude stocks combined to lift prices.
A report that the pace of private sector job losses slowed also provided a tailwind for the oil bulls who are betting that a global economic recovery is around the corner.
I’m bullish on the oil services trade, explains Karen Finerman. Transocean [RIG
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] had a strong earnings report but I think there’s still room to run.
I’m watching Baker Hughes [BHI
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], adds Pete Najarian. It’s underperformed and I’m thinking it might be ready to catch up.
In commodities, I think Agrium [AGU
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] is a buy, says Jeff Macke. It’s reacting well to bad news.
Or you can play the Materials SPDR [XLB
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], adds Pete Najarian.
In the space, I like Braskem [BAK
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], adds Tim Seymour, as an emerging markets play.
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BULL MARKET OR BS?
Considering the S&P is up 35% from its bear market low -- and up 5% this month alone – we can’t help but wonder, is the run sustainable?
There’s a whole of money on the sidelines that’s fearful they’re missing this move in this market, explains Christopher Zook, the CIO OF Caz Investments. After being down last year there’s now way money managers can excuse being down this year and not participating in the rally. So we’re seeing panic buying which leads me to believe the rally is almost finished.
Zook adds, I would not be surprised to see a 50% retracement.
To see our entire interview with Christopher Zook -- including how he recommends trading right now -- please watch the video above.
- Web Extra: The Final Trade
- Buying Fear: How to Own Volatility
- Burned by A&F, Alcoa & More
- Chartology – The Stocks/Jobs Disconnect
- The Latest Picks That Paid — Friday, November 6
- Pops & Drops: Burlington Northern, Starbucks, Kraft...
- Time to Trade on Unemployment
- BEHIND THE MONEY: Don't be Fooled, Jobs Matter to Stocks
- Halftime Report: Wal-Mart Poised for Breakout
- Your First Move For Friday November 6th
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Trader disclosure: On May 6th, 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 (WFC), (GS), (SDS), (AGU), (PCLN), (GE); Seymour Owns (AAPL), (BAC), (F), (FXI), (RIG), (TM), (TSO); Finerman's Firm Owns (BAC) Preferred Shares And Is Short (BAC) Stock; Finerman's Firm Owns (CSCO); Finerman's Firm Owns (MSFT) And (MSFT) Put Spreads; Finerman's Firm Owns (PM); Finerman's Firm Owns (PBR); Finerman's Firm And Finerman Own (RIG); Finerman's Firm And Finerman Own (WFC) Preferred Shares; Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO); Najarian Owns (BX) Call Spread; Najarian Owns (DFS) Calls; Najarian Owns (EWZ) Call Spread; Najarian Owns (FIG); Najarian Owns (MS) And Is Short (MS) Calls; Najarian Owns (MCD) And Is Short (MCD) Calls; Najarian Owns (NVDA) And Is Short (NVDA) Calls; Najarian Owns (TSO) Call Spread; Najarian Owns (XLI) Put Spread; Najarian Owns (XHB) Call Spread; Najarian Owns (XLF) Call Spread; Najarian Owns (BYD) Calls
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For Christopher Zook
Zook Owns (LLY), CAZ Investments Owns (LLY) For Its Own Account, CAZ Investments Has Bought (LLY) For Clients
Zook Owns (WAT), CAZ Investments Owns (WAT) For Its Own Account, CAZ Investments Has Bought (WAT) For Clients
Zook Owns (WFT), CAZ Investments Owns (WFT) For Its Own Account, CAZ Investments Has Bought (WFT) For Clients
Zook Owns (RIG), CAZ Investments Owns (RIG) For Its Own Account, CAZ Investments Has Bought (RIG) For Clients
CNBC.com with wires
Data is a real-time snapshot *Data is delayed at least 15 minutes