STOCKS RALLY AS YIELDS DECLINE
Stocks jumped Thursday as gains in commodities like oil and natural gas signaled that traders expect a strengthening economy will demand more energy.
U.S. crude oil futures ended above $65 a barrel on Thursday, the highest settlement since early November, after government data showed a steep drop in oil inventories last week.
Meanwhile, robust demand at an auction for Treasury debt also eased fears that the government would have to pay higher interest rates to entice buyers.
It was the second straight day that interest rate movements called the shots in the stock market, and not likely the last.
Analysts expect Wall Street will have to continue to grapple with worries that the government could eventually exhaust buyers' appetite for debt with an unprecedented level of bond sales.
However, Washington needs to raise the money to pay for its bank rescue plan and economic stimulus spending.
How should you game it?
Strategy Session with the Fast Money Traders
The auction went much better than expected, explains Guy Adami. I think there were a lot of traders betting on a disaster and it didn’t happen. That sent the market higher. But other than that – I’m not that enthusiastic about the action. It seems to me we're just going on either side of 900 in the S&P, right now.
On June 10th and June 11th there will be another Treasuries auction, reminds Joe Terranova. If the market can stay above 900 I think a massive amount of cash will be forced into the marketplace – sending stocks even higher.
Personally, I can’t understand why the market rallied, adds Karen Finerman. The auction went a little bit better than expected so I sold a little TBT – though that’s a trade I still want to have over the long-term. It seems to me the market is focused on Treasuries and employment. That's what moves stocks these days.
What’s good for Wall Street isn’t always good for Main Street. I think the action in the Treasury market means higher mortgage rates ahead, adds CNBC’s Steve Liesman. And we may need the sub 5% mortgage rate to get the housing market going so it could be a real catch-22..
FINANCIALS HELP RALLY
Shares of big banks such as Bank of America and JPMorgan closed higher as investors placed bets that the worst of the financial crisis is behind the larger financial institutions.
The yield curve is great news for the banks, muses Joe Terranova. I think this is exactly what Ben Bernanke wants.
It’s only great for the banks if they can lend, adds Guy Adami. Things seem to still be tight on the consumer side – that begs the question can people afford to borrow?
It’s worth noting hat BAC has raised an extraordinary amount of money in a relatively short period of time, adds Karen Finerman. That’s impressive. I’ve been long the BAC preferred – but that trade is now over.
TOPPING THE TAPE: OIL TOPS $65
As we said above, U.S. crude oil futures ended above $65 a barrel on Thursday, the highest settlement since early November, after government data showed a steep drop in oil inventories last week.
Traders also factored in better-than-expected economic data and OPEC's decision to hold production at current levels.
Oil is defying fundamental logic but investors are taking risk and they’re using oil as the proxy, muses Joe Terranova. That says to me the market has found its footing. It suggests growth ahead and a more normalized market.
I think oil over $60 is a problem, counters Pete Najarian, because it pushes up prices at the pump. I'm not sure consumers can withstand high gas prices.
If you’re looking to profit from the pain look at OIH or RIG, adds Karen Finerman.
What do you think? Tell is now!
AFTER HOURS ACTION: DELL
Dell , the world's No. 2 PC maker, narrowly beat analysts' expectations for sharply reduced profit on Thursday, even as the global downturn hit technology spending, helping its shares rise after hours.
The company said net income fell to $290 million, or 15 cents a share, in the fiscal first quarter ended May 1, from $784 million, or 38 cents a share, in the year-ago period.
However, sales of laptops and the smaller, less powerful netbooks, which together make up Dell's largest product category, fell 20 percent in the quarter.
I’m not sure there’s a huge story here, muses Guy Adami. I wish I could say it’s a proxy for other trades – but I can’t say that.
I like Dell, adds Pete Najarian, if only because they didn’t fall apart. But I wouldn’t chase it.
TOPPING THE TAPE: TECH ROCKIN’
Palm shares enjoyed a bost after Verizon Wireless said Pre would be part of its line-up.
I think you can own Palm right into the release but then I’d get out, counsels Guy Adami.
TIME WARNER UP ON AOL SPLIT
Time Warner on Thursday made official plans to separate its AOL division sometime around the end of this year, a widely expected move that sheds one of the media company's weakest divisions.
For Time Warner, the move represents a return to its roots as a pure content company with a focus on its cable channels, film studios and publishing businesses and unwinds a massive merger in 2000 that failed to live up to its promise.
The struggling AOL, for its part, will once again be an independent company left to seek its fortunes in an Internet landscape dominated by Google and smitten with social networks like Facebook and Twitter.
That was the worst merger ever, exclaims Guy Adami.
BULL MARKET OR BS?
Considering the S&P is up 35% from its March lows, do stocks still have room to run?
According to Dan Greenhaus, of Miller Tabak trade cautiously. He believes recent moves are a sucker’s rally and that ultimately stocks are heading lower.
Greenhaus offers the following three reasons to support his thesis:
Why It's A Sucker's Rally
1. Retail Sales: Still Too Low
2. Consumer Debt: Still Too High
3. Market Catalyst: Still Missing
Want to hear more. Watch the video now!
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Trader disclosure: On May 28th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Finerman Owns (RIG); Finerman;s Firm Owns (RIG), (PBR), (TBT); Finerman's Firm Owns (BAC) Preferred, (WFC) Prefereed; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Terranova Owns (ABT), (TER), (HES), (JPM), (JOYG), (XBI), (RIMM); Terranova Is Short (XOM) Call Spread; Terranova Owns (DIS) Call Spread; Terranova Owns July Nat Gas Futures; Najarian Owns (ISIS); Najarian Owns (AMAT) Calls; Najarian Owns (FCX) Call Spread; Najarian Owns (BX) Call Spread; Najarian Owns (INTC) Call Spread; Najarian Owns (MOS) Call Spread; Najarian Owns (XHB) Call Spread; Najarian Owns (XLB) Call Spread; Najarian Owns (XLU) Call Spread
CNBC.com with wires