STOCKS STUCK IN A RUT
The market traded sideways on Tuesday with Dow finishing slightly lower and the S&P 500 closing a little higher. Investors appear hesitant to place big bets ahead of the Federal Reserve's decision on interest rates due Wednesday afternoon.
Boeing dragged down the blue chip index after it postponed the first test flight of its 787 Dreamliner for a fifth time. Also a smaller than expected increase in existing homes sales wasnot enough to alleviate investor anxiety about economic reports later in the week on durable goods orders, new home sales and personal spending.
There's not a lot of conviction on behalf of buyers, explains Jim Herrick, manager of equity trading at Baird & Co. The market has priced in good second-quarter earnings, and priced in the economy moving out of recession by the fourth quarter. As a result, ifyou see any data that refutes that, the market will head lower.
How should you be positioned?
Strategy Session with the Fast Money Traders
Tuesday’s market action was all about the Fed, muses Karen Finerman. However it also seems that the market is starting to believe rate hikes toward the end of the year are less likely.
I was interested to see financials and commodities perform well on Tuesday, adds Joe Terranova. I think sector rotation is back. Personally, I bought some RIM.
I’ve got my eye on the UYG, adds Pete Najarian. It’s been very active, and if the XLF moves up one point it should move two.
If the S&P drops to 850 that will bring us to a 10% correction, reminds Tim Seymour. However, I don’t see a lot more downside to this market. Instead I expect we’re stuck in a range.
AFTER HOURS ACTION: ORACLE
Oracle reported earnings and sales that declined from last year, but both numbers topped analysts' estimates.
Oracleprofit came in at 46 cents per share in the fourth quarter beating analysts' average forecast of 44 cents, according to Reuters Estimates.
New software sales, a closely watched revenue measure, fell 13 percent to $2.7 billion. Analysts were expecting them to decline about 18 percent.
The technology giant had helped set analysts' forecasts in March, when executives warned that the recession and strong dollar would take a substantial bite out of profits.
What’s the trade?
I’m fairly bullish on Oracle however with a P/E of 18 I can’t help but wonder if it’s a little rich.
OPTIONS ACTION: YAHOO
Pete Najarian has spotted unusual options action in Yahoo!
The volume of upside calls suggest to me the stock could move higher, reveals Najarian.
BOEING’S NIGHTMARE CONTINUES
Shares of Boeing plunged on Tuesday after the aviation giant postponed the first test flight of its 787 Dreamliner for a fifth time, citing a structural problem.
Boeing gave no new date for the flight or the first delivery, which also will be rescheduled. The revolutionary carbon-composite aircraft, already two years behind its original schedule, was supposed to fly in the second quarter of 2009.
This is such an embarrassment, says a flustered Karen Finerman.
TOPPING THE TAPE: MEDICAL DEVICES
Shares of Boston Scientific closed higher after a new study concluded that early intervention with the firm’s implantable device, called cardiac resynchronization therapy, can slow the progression of heart failure.
The study could significantly expand the market for the devices, which coordinate heart pumping through electrical pulses, beyond the sickest heart failure patients.
Spencer Nam, an analyst at Summer Street Research, said the market generally had expected positive results, but the 29 percent reduction was surprisingly strong.
The results could lead the more than $12 billion market for defibrillators and pacemakers to improve from high-single-digit growth to at least 10 percent growth, Nam said.
Medtronic and St Jude, could also benefit, adds JP Morgan analyst Michael Weinstein. And I think there’s room to run in all the names mentioned here.
TOPPING THE TAPE: STEEL
Demand may be returning to the steel sector. U.S. Steel said on Tuesday that it is considering a restart in production in at least one blast furnace due to an improvement in orders.
It seems to me that steel prices will go higher, speculates Tim Seymour. If you’re looking for a play in the space look at AK Steel.
US Steel also looks attractive to me if it slides just a little lower, adds Pete Najarian.
I got out of my US Steel position today, counters Joe Terranova.
THE OBAMA TRADE: BERNANKE ON THE BUBBLE?
President Barack Obama on Tuesday said Federal Reserve Chairman Ben Bernanke has done a good job since the current financial crisis began but gave no hint whether he wants him to carry on when his term ends.
"He has done a fine job under very difficult circumstances," Obama said at a news conference in response to a reporter's question. Bernanke's term as U.S. central bank chief expires at the end of January.
"I'm not going to make news about Ben Bernanke," Obama said, before offering praise for the job the Fed chief has done. "I would say all financial regulators didn't do everything that needed to be done to keep the crisis from happening." he added.
Obama implied that he didn't consider the Fed blameless in allowing reckless behavior by the financial sector to create conditions for the financial market meltdown that began in 2007.
BULL MARKET OR B/S?
New data released by the National Association of Realtors shows that sales of previously owned homes in the United States rose at a slower-than-expected pace in May. The results point to a sluggish recovery from the severe economic recession.
Can the markets recover without housing? For insights we turned to Steve Cortes of Veracruz.
He tells the desk that the homebuilders tend to be correlated to employment and the current weakness in the sector probably means higher job losses. As a result, he suggests shorting banks with the KBE and shorting consumer names with the XLY.
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Trader disclosure: On June 23rd, 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) & Is Short (INTC) Calls; Najarian Owns (JPM) & Is Short (JPM) Calls; Najarian Owns (ORCL) Call Spread; Najarian Owns (YHOO) Call Spread; Terranova Owns (TER), (XBI), (BTU), (MSFT), (HES), (RIMM), (BTU), (MS); Terranova Is Short (GENZ) Call Spreads; Terranova Owns (GENZ) And Is Short (GENZ) Calls; Terranova Owns (DIS) Call Spreads; Terranova Is Short (XOM) Call Spreads; Finerman Owns (TBT); Finerman's Firm Owns (MSFT), (PBR), (RIG), (NOK), (TBT), (YUM), (WMT); Finerman's Firm Owns (BAC) Preferred; Finerman's Firm Is Short (BAC), (IJR), (MDY), (IWM), (SPY), (USO),(CAKE); Seymour Owns (BAC), (AAPL), (EEM), (FXI), (NOK), (PWRD)
J.P. Morgan has an investment banking relationship with (STJ)
Cortes is short (KBE)
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