HALFTIME REPORT: BANK OF AMERICA FAILS UP
Word that Bank of America may need to raise another $34 billion and Wells Fargo may need to raise another $15 billion, couldn’t drag down the Dow or S&P on Wednesday. By mid-day both major indexes were trading higher.
In fact, 10 of the 19 institutions under review may need more capital, but that didn’t seem to bother investors. Shares of major banks advanced, sending the KBW Bank index surging.
Positive sentiment in the market was likely generated by reassuring labor market data and Walt Disney's better-than-expected profit.
ADP data showed private-sector job losses slowed in April, coming in below expectations. The figures provide yet another reason for optimism that the U.S. economy has seen the worst; particularly relevant before the government's release of the monthly jobs report on Friday.
Also Disney's results gave more support to views that the economy may be stabilizing and consumers may be regaining some confidence.
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Instant Trading Insights from the Fast Money Crew
We’ve seen the same pattern in this market day after day, muses Jeff Tomasulo of SMB Capital. A bank like Wells Fargocomes out and says we need to raise capital and investors bid the stock higher. To me that’s a sign of strength.
At this point, I’d ask myself how confident I feel about banks, reveals Fast Money trader Joe Terranova. Personally, I feel confident about Goldman, Morgan and JP Morgan. In fact, I'm so confident that today I sold in the moneycalls against Morgan.
I’ve spotted downside covering in the STTputs, reveals Jared Levy of Peak6 Investment. A huge buyer closed out of his position and took a huge loss. That suggests to me investors are feeling optimistic about best of breed plays.
OIL HITS 2009 HIGH
Oil broke through $56 a barrel on Wednesday, bouncing up from early trade around $54 on hopes that the worst of the economic crisis has passed.
Meanwhile, gasoline stocks posted a small but unexpected decline of 200,000 barrels versus a forecast for a 700,000 barrel build.
At these levels, I think oil is a sell, reveals Joe Terranova. I think it’s getting ahead of itself.
CHART OF THE DAY: COPPER
Technical analyst John Kosar of Asbury Research has noted that copper is pushing against its 200-day moving average. How copper reacts to its 200-day moving average should be a good indication of whether the March rally continues from here, he says.
Copper is very tied to the US economy, explains Kosar. How the price reacts is a “tell” – it will reveal whether the March rally has more legs or if we’re going to have a broad retracement in stocks.
TAKE YOUR POSITION: TECH WEAKER BEFORE CISCO EARNINGS
Ahead of Cisco earnings the Nasdaq was trading modestly lower. Investors were clearly taking profits in Apple and other bellwether names including IBM , which is one of the day’s biggest drags.
Cisco has had a big run, explains Jared Levy. If I was long the stock, I’d buy the 19-puts and sell the 21-calls. That way I’m protected.
In the space I like IBM and Apple better, reveals Jeff Tomasulo. Both stocks are buys on a pullback.
I’m not as bullish on tech anymore, reveals Joe Terranova. The whole space has outperformed. Instead I’d put money into sectors that have underperformed.
TOPPING THE TAPE: FXI
China's economy is expected to grow 7 percent to 8 percent this year and next, and will begin to recover in 2010, influential People's Bank of China adviser Fan Gang said on Wednesday.
"In 2010, with government policies starting to take effect and external markets beginning to stabilize, various kinds of domestic demand will prop up growth," Fan told a financial conference in Shanghai.
"China's economy will be less reliant on government policies. Corporate investment and real estate investment will recover," he said.
I’d be cautious of the FXI, reveals emerging markets trader Tim Seymour. If you’re looking for a trade, I’d look at the consumer play. People in China are buying more and more domestic goods. I think the play is long LG Electronics or AU Optronics. I also like China Mobile.
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CNBC.com with wires