MARKET PULLS BACK AFTER STRONG WEEK
Both the S&P 500 and Dow fell on Monday as investors booked profits in the financial sector after a two-month run-up. Large common stock offerings that loom in the days ahead, likely spooked investors.
In fact, U.S. Bancorp , Capital One , and BB&T Corp were among the day’s biggest losers and the latest to seek additional capital by announcing stock offerings.
Also comments made by widely followed banking analyst Whitney Tilson on CNBC fueled the selling. She told us banks are overvalued and the government enabled them to have better first quarter earnings than they should.
"At a core basis, I would not own these stocks," Whitney said in a live interview. "Their business models are not going to come back."
How should you be trading?
Strategy Session with the Fast Money Traders
I’m skeptical about this rally explains Guy Adami. If the S&P closes below 900 it probably trades to 875.
If you’re looking for a trade, look at Wells Fargo, he adds. It seems to me we’ve seen capitulation buying. Also Goldman had an outside day on Thursday, which was technically bearish. It’s time to take a pause in both these names.
I think the SDS is the way to play it but don’t jump in with both feet – pace yourself, counsels Jeff Macke.
It seems to me that tape is in tact, counters Tim Seymour. But it’s a fine trading strategy to do nothing.
If we break 900, I would also start to get concerned, adds Pete Najarian. The thing I’m watching closely is all these secondary offerings. Right now the market is reacting well but sooner or later one of these stocks will get smacked around.
BULL MARKET OR BS?
With the S&P 500 up more than 34 percent from its March 9 closing low, has this market gone too far too fast?
Dover Management CIO Doug Cliggott thinks it has. He tells the Fast Money desk, the S&P 500 is overpriced. ”Until we comfortably clear the 200-day moving average the trend is still down. We still have a lot of hurdles.”
As for the bank stocks he says, “I certainly wouldn’t buy them and after the move they’ve had, I’m looking for short opportunities.”
In case you're wondering, Cliggott is short Goldman , Morgan , American Express and Capital One .
TOPPING THE TAPE: TECH
Technology was one of the few sectors to close in the green on Monday with investors rotating into the space after German software maker SAP said the next few months may bring "glimmers of hope" for the global economy.
As a result America’s big-cap software makers, including Oracle and Microsoft offset selling in the sector and helped the Nasdaq finish near break-even.
"Tech names lead the market when the economy starts to turn," says David Bellantonio, head of trading at Instinet. "(That may be why) tech is outperforming the rest of the market."
In this space I think the trade is Intel, counsels Guy Adami. It’s a buy at $15 even. That trade has worked 4 times in a row.
I’m watching Microsoft, adds Pete Najarian. They’re raising capital and now the market is wondering – what are they raising it for? Is it for a buyback?
Microsoft is sitting on billions and yet they do a debt raise, exclaims Jeff Macke. What’s going on?
WAL-MART UP AHEAD OF EARNINGS
Investors are pouring over retail figures with some of the nation’s largest names including Macy’s, Kohl’s and Wal-Mart scheduled to report earnings later in the week. Who will surprise and who will disappoint?
I would much rather be long Target than Wal-Mart, bristles Jeff Macke.
I’ve been bullish on Gap and Home Depot, reminds Guy Adami. But they’ve both moved and now they look a little long in the tooth.
WHALE WATCHING: ACKMAN MAKES HIS CASE
Activist investor William Ackman publicly introduced his nominees for Target's board on Monday, insisting his lineup can bring fresh, independent insight that the discount retailer needs to better position its business for the long term.
Ackman's hedge fund Pershing Square Capital Management owns a 7.8 percent stake in Target. Since accumulating his stake, Ackman has pushed the Minneapolis-based retailer to make changes to its business to boost its stock, including spinning off the land under its stores into a real estate investment trust.
BERNANKE TO SPEAK ON ECONOMY
A Monday night speech by Ben Bernanke should keep the spotlight on banks, Tuesday.
"Now that the stress tests are out, we have some certainty in terms of where banks stand in the spectrum of stronger to weaker," said Richard Sparks, senior equities analyst and options trader at Schaeffer's Investment Research.
Now, Bernanke has two questions to answer, adds CNBC’s Steve Lisman. They are: were the stress test hard enough? And will the stress test play a part in future regulatory decisions? His comments could impact Tuesday’s trade.
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Trader disclosure: On May 11th, 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), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Macke Owns (GE), (AGU), (AMZN), (APPL), (SDS), (IMAX), (WFC), (TGT); Seymour Owns (AAPL), (BAC), (C), (DRYJ), (EEM), (FCX), (PBR), (TSL); Seymour's Firm Owns (RIG); Najarian Owns (AMD) Call Spread; Najarian Owns (BX) Call Spread; Najarian Owns (CROX) Calls; Najarian Owns (FIG); Najarian Owns (INTC) Call Spread; Najarian Owns (MS) & (MS) Calls; Najarian Owns (PALM) & (PALM) Calls; Najarian OWns (XHB) Call Spread; Najarian Owns (XLB) Call Spread; Najarian Owns (XLU) Calls
For Doug Cliggott
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