STOCKS PULL HIGHER IN LATE SURGE
Both the Dow and S&P 500 rebounded late Monday as investors' concerns about the strength of an economic recovery triggered a move into defensive stocks.
The market action was negative through most of the session until the last half hour when the push into sectors likely to outperform in a down economy lifted names such as Kraft Foods .
Another tailwind for consumer stocks came from the declining price of oil . Investors bet that although the action signals weakness for the global economy, it also means a decline in prices at the pump and that should boost the consumer.
How should you be positioned?
Strategy Session with the Fast Money Traders
General Mills is trading right around $60, explains Guy Adami. I like this stock but $60 has been resistance. I would only be bullish if it closes above $60.
I’m long Wal-Mart and Kraft , adds Karen Finerman. They’re defensive and I like the space if we’re seeing a consumer that’s growing uncertain.
My play is sligthly downstream, adds Tim Seymour. I’m looking at Bemis which is the company that packages foods for companies such as General Mills.
OIL SINKS TO 5-WK. LOW
Crude prices sank to a 5-week low tumbling $2.68, or 4 percent, to settle at $64.05 per barrel on Monday. The move was triggered by economic concerns and according to Tradition Energy’s Addison Armstrong, a reminder that tepid demand and rising inventories don’t support the momentum.
What's the oil trade?
Oil seems like a proxy for economic health, muses Karen Finerman. Yes lower gas prices are good for consumers but if it means lower economic activity then in the long run the move lower isn’t good for consumers at all.
I think it’s time to get back in, counsels Tim Seymour.
I'd play energy from the long side with positions in Hess and Petrobras, adds Joe Terranova. But I'd avoid the oil futures.
Moves in gold sometimes precede moves in crude, reminds Jon Najarian. Looking at patterns in charts I think we could see the bottom around the end of July.
TECH CAN’T FIGHT HIGHER
The Nasdaq slipped Monday as investors rotated out of the tech sector which is viewed as more reliant on the economic cycle. Apple was among the biggest drags.
What’s the tech trade?
If Intel trades down to $15.75 that’s your entry point, counsels Guy Adami. And I like IBM, he adds.
Microsoft looks exciting ahead of earnings, adds Tim Seymour. I’d buy it on the weakness.
I have a position in Cisco which I still think is attractive, says Karen Finerman. I would be a buyer right here.
TOPPING THE TAPE: PLASTIC
Bucking the negative sentiment on the Street, American Express led the Dow advancers, after Stifel Nicolaus upgraded the company and said it was the least exposed to new rules on the credit card sector.
As far as I’m concerned charge-offs are trending the wrong way, says Guy Adami. I’d rather own Mastercard on a valuation basis.
I think charge-offs are a problem for Bank of America , JPMorgan and Capital One , adds Tim Seymour. I’d be cautious of any bank that made their name on credit cards.
In the space I would go with cream of the crop, counsels Karen Finerman. And that’s Visa .
TOPPING THE TAPE: CONSUMER STAPLES
As we mentioned above, late in the day consumer staples such as Kraft popped as investors bet these names are more likely to perform well in a downturn.
I’m a buyer of Coke , counsels Tim Seymour.
I like Yum Brands , adds Guy Adami. I think it could trend to $41.
TRADING THE GLOBE: OBAMA IN RUSSIA
President Barack Obama opened his first Moscow summit on Monday at the Kremlin with Russian President Dmitry Medvedev.
The dominant theme of the summit is security, and Obama and Medvedev are set to announce progress toward renewing a strategic arms reduction pact that expires in December. The eventual deal could cut warheads from more than 2,000 each to as low as 1,500 a piece.
Russia is also agreeing to let the United States use its territory and air space to move arms into Afghanistan for the forces fighting extremists there. That deal, a big breakthrough for Obama in dealing with a widening war, was announced before Obama's arrival.
The progress on nuclear arms is impressive, says Tim Seymour. That’s probably bad news for uranium producers such as UUU.
STORY OF THE DAY: CAN MARKET RALLY WITHOUT COMMODITIES?
With commodity prices falling across the board investors want to know if stocks can continue their advance in the face of such serious headwinds?
For insights we turn to esteemed commodity trader Dennis Gartman, author of The Gartman Letter.
How’s Gartman trading the vicious correction in oil? Find out now. Watch the video!
You can find our interview with Dennis Gartman at the end of the Word on the Street video.
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Trader disclosure: On July 7th, 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); Finerman's Firm Owns (BAC) Preferred; Finerman Owns (BAC) Preferred; Finerman's Firm Is Short (BAC); Finerman Owns (RIG), (TBT); Finerman's Firm Owns (FCN), (MSFT), (NOK), (PBR), (RIG), (TBT), (WMT), (PLCE); Seymour Owns (AA), (AAPL), (BAC), (BX), (EEM), (FXI), (F), (NUE); Seymour's Firm Owns (MBT); Seymour's Firm Is Short (PBR), (PTR); Najarian Owns (COST), (DNDN), (GS), (MS), (V), (WFC), (HK); Najarian Is Short (NVDIA); Najarian Owns (AAPL) Calls
Gartman Owns (AA), (BX), (K), (SDS)
Gartman Is Short (POT), (BRK.b)
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