Halftime Report: Sell Or Second Chance To Buy?
Investors were grappling with mixed signals on Wednesday, as they struggle to determine the next big move in stocks.
By lunchtime, both the Dow and S&P had slipped into negative territory after key retail sales data came in worse than expected and worries persisted that the spate of secondary share offerings will dilute shareholder value, badly.
However glimmers of bullish sentiment remain, with the head of AIG telling Congress that it will repay all its taxpayer aid in three to five years if the economy permits.
Considering stocks have posted their biggest three day drop since March is this a signal to sell or a second chance to buy?
Instant Insights from the Fast Money Traders
I do think there are opportunities in this market, reveals Fast Money trader Pete Najarian. I’m looking at financials. JP Morgan, Goldman and Morgan are starting to pullback.
The market was probably overextended and needs to correct, adds Dennis Gartman, author of The Gartman Letter. And it could be a serious correction. I would not be surprised to see the Dow trade back down to 7,900. That would be within normal corrective activity.
In my view this pull back could be somewhat serious, adds John Kosar of Asbury Research. It could last a month or two and we could give back a third or more from the March lows. It seems to me a lot of investors piled in at the very end – it feels very top heavy here. If I’m right and we turn down, I think you’ll see a lot of people run for the doors at the same time.
Much of the rally was fueled by the government flooding the system with capital, says Steve Cortes of Veracruz. Business conditions have not improved in any way. And after a 9 weeks, I too, think it’s time for a pullback.
It seems investor aren’t sure what to make out of the latest news from Intel .
On the negative side, the EU said it will fine Intel $1.45 billion for sales tactics that may have shut out AMD. But on the positive side, CEO Paul Otellini suggested the coming quarter could be better than expected.
Intel plans to appeal the EU decision, reminds Pete Najarian. If nothing more, that buys them time. In the short-term, it seems to me the stock continues to perform; hitting support around $15.
Looking at the broader tech sector, our research shows that of the daily assets traded in the Rydex Assets Fund, 24% of total assets are going into tech, explains John Kosar. When tech gets that over-loved, typically we have a sell-off.
BUY FORD ON THIS DIP?
Ford shares were trading lower around lunchtime after the automaker raised $1.4 billion through a 300 million share offer for $4.75 per share, a move that its chief executive said was an important step toward getting profitable again.
Ford said the proceeds would be used for general corporate purposes, including to fund a portion of its obligation to a union-run fund set up for retiree healthcare expenses.
What’s the trade?
I would be long Ford on this dip, counsels Jeff Macke. They’re 30% off the highs of two days ago. It seems to me Ford at these prices is a compelling value.
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Trader disclosure: On May 13th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders;
Najarian Owns (INTC) Call Spread
Najarian Owns (AMD) Calls
Najarian Owns (F) & (F) Calls
Gartman Owns (DE)
Gartman Owns (DRYS)
Gartman Owns (SDS)
Gartman Is Short (GLD)
Cortes Owns (GS)
CNBC.com with wires