STOCKS SURGE TO END WINNING WEEK
Both the S&P and Dow rose on Friday, as stress test results and reassuring jobs data fueled hopes the worst is over for banks and the economy.
For the week, the Dow rose 4.4 percent and the S&P 500 gained 5.9 percent, while the Nasdaq jumped 1.2 percent.
Is it too late to get in on the run?
Strategy Session with the Fast Money Traders
All is not what it seems in this market, muses Guy Adami,. I think the move on Friday was a rotation out of tech and into the banks. I wouldn’t jump in right now.
If you look at the price action I think you see shorts that were scared out of the market, adds Joe Terranova. Whether this is a top or not, I don’t know. Fundamentally I don’t see any catalysts but from a technical perspective there’s no reason to get out.
I’m impressed with the follow-through, counters Jeff Macke. I’m long Wells Fargo. The secondary was received amazingly well.
I think the market action is pretty impressive, says Karen Finerman. The thing that’s important to note is that we could be entering a virtuous cycle. If banks can issue equity now, they are in fact healthier.
BANKS SOAR AFTER STRESS TESTS
Bank stocks charged higher Friday, one day after stress test results showed banks still need to raise $74.6 billion to build a capital cushion.
Although that’s an enormous figure investors found the news bullish; interpreting the results to mean that uncertainty has been removed from the equation.
Even Citigroup and Bank of America, two firms with the largest capital needs, were also well in the green.
The release of the stress test results "has given people a little bit of confidence that the government can help to solve this part of the financial crisis," says Richard Sparks, senior equities analyst and options trader at Schaeffer's Investment Research.
"There's a sense that the government actually has a logical plan ... even if things got worse, these companies will be able to survive. That helps bolster confidence in the administration."
What’s the trade?
Anytime that a stock moves 60% in a month I think you’d be foolish not to take profits. And many banks stocks have done just that. Or if you don’t do that, at least put put on a trailing stop.
Guy is 100% right, adds Joe Terranova. There’s no reason to think the banking sector can’t correct.
ANALYZE THIS: JOB LOSSES STABILIZING
Meanwhile, new figures showed that employers cut 539,000 job in April. Although it’s a sizable number, it’s the smallest reduction since October, and investors are interpreting the number as a “good” report because it hints at improvement in the labor market.
I think the report is still troublesome, muses Joe Terranova. Those jobs have to be recovered.
It’s important to remember that employment is a lagging indicator, adds Chris Thornberg of Beacon Economics. It's the surface number. If you dig down, you find data that suggests consumer spending has bit bottom and industrial production will probably increase.
WARNING SIGN? TREASURY YIELDS UP
Benchmark 10-year note yields have been hovering at five-month highs after breaching the 3-percent threshold last week. The 10-year yield is on track for its seventh straight weekly rise, a move that has not happened in five years.
Treasury auctions are not going well, explains Karen Finerman and I think more of the same is to come. To me it means inflation is coming. I’m long the TBT and short the 30-year.
OIL HITS 6-MO. HIGH
Oil closed higher for the third consecutive day and capped the week with gains of $5.43 per barrel, or 10.21%.
"We believe that crude prices are being driven higher by a combination of rising expectations for a faster economic recovery, increased fund flows into commodities and higher utilization at U.S. refineries," says Adam Sieminski at Deutsche Bank.
What’s the trade?
It seems to me that the move in oil is not demand driven, says Joe Terranova. It’s driven by index fund buying. You always have to be careful when there's strong speculators in this market.
If you want to play the space, I think Baker Highes has room to $45, muses Guy Adami.
Nat gas has shot higher too, adds Karen Finerman. Keep an eye on it, the move was remarkable.
TOPPING THE TAPE: MCDONALD’S
McDonald's reported April same-store sales were up 6.1 percent in the United States, helped by new coffee drinks and snacks.
The No. 1 hamburger chain is one of the restaurant industry's top performers due in large measure to its Dollar Menu luring in cost-conscious diners.
Remember this stock is digesting years of gains, says Jeff Macke. From here, it won’t go up in a straight line.
Also, $56.50 has been huge resistance on the upside, adds Guy Adami. That’s what you have to watch.
Warren Buffett's Berkshire Hathaway posted its first quarterly loss since 2001, hurt by losses on derivative contracts and a big investment in the oil company ConocoPhillips.
The net loss for the Omaha, Nebraska-based insurance and investment company was $1.53 billion, or $990 per Class A share, and compared with a profit of $940 million, or $607, a year earlier.
Excluding investments, operating profit fell 12 percent to $1.71 billion, or $1,100 per share, from $1.93 billion, or $1,247. That profit was in line with the $1.7 billion that Buffett estimated at Berkshire's annual meeting last Saturday.
Whitney Tilson of T2 Partners tells the traders he's keeping an eye on the stock, but he wouldn't add to his position here.
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Trader disclosure: On May 8th, 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), (TGT), (WFC), (GS), (PCLN), (GE), (SDS), (AGU); Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Finerman's Firm Owns (MSFT) And Is Long (MSFT) Put Spreads; Finerman's Firm Owns (UNH); Finerman's Firm And Finerman Own (WFC) Preferred Shares, Finerman's Firm Is Short (WFC); Finerman's Firm Is Short (IJR), (SPY), (MDY), (IWM), (USO), (BBT); Terranova Owns (XBI), (GENZ), (ABT), (BP); Terranova Is Short (XOM) Call Spread; Terranova Owns (MS) And Is Short (MS) Calls; Terranova Owns (DIS) Call Spread; Terranova Is Short (JPM), (BRCM), (POT), (X), (WYNN), (JOYG), (HES); Terranova Is Short June Crude Oil Futures; Terranova Is Short June Natural Gas Futures
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"
For Whitney Tilson
Funds Managed By T2 Partners Own Approximately $13 Million Of (BRK.A) And (BRK.B) Stock And Call Options
Portfolios Managed By T2 Partners Are Long (WFC)
Portfolios Managed By T2 Partners Are Long (AXP)
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