BEST 3 DAYS SINCE RALLY BEGAN
By the closing bell stocks recorded their best three days of gains since the rally began in March, as companies such as Intel and Goldman Sachs posted much better-than-expected results. In fact, the S&P 500 has gained 6.1% so far this week, and it's only Wednesday.
The current earnings season is among the most highly anticipated in years as investors look for evidence to support optimism for an economic recovery.
In a sign that consumers might be faring slightly better, credit card companies said defaults and delinquencies were lower in June than expected. Also, regional economic data underpinned the positive sentiment, with the New York Fed's Empire State index for July showing business conditions in the state at their strongest since April 2008.
What’s the word on the Street?
The close above 930 in the S&P is very bullish, says Tim Seymour. Investors came into this earnings season expecting weakness and so far they’ve been wrong.
We finished on the high of the day in volatility, adds Pete Najarian. That suggests panic to me but panic on the upside. Investors are worried they may be missing the next leg higher.
Only 15% of S&P earnings come out this week, says Joe Terrnova. It’s not until next week and the week after that we get the bulk of the earnings reports and it seems investors are afraid they’re missing something.
Host Melissa Lee doesn’t buy it. She says with 85% of earnings still ahead it’s hard to think Goldman and Intel are barometers for the entire market.
INTEL LEADS TECH SURGE
Shares of Intel led the Nasdaq higher after solid results reinforced hopes for an economic recovery and a rebound in technology spending.
The bulls were particularly elated to hear about Intel’s upbeat outlook, which was due to strong consumer demand for PCs. Rival Advanced Micro Devices jumped on the news.
I think the story carries across the entire semiconductor space and that’s how I’d play it, counters Joe Terranova.
It’s interesting to me that Dell is talking about weak PC demand, but Intel is saying the opposite, muses Karen Finerman. I’m hoping it’s a company specific issue.
In tech I’ve got my eye on McAfee , reveals Pete Najarian. The August 45 calls have been extremely active and it suggests the stock could move significantly higher.
If you’re looking for a tech trade, I’d look at Cisco , adds Finerman.
THE RALLY: COMMODITY STOCKS
Oil rose more than 3 percent to over $61 a barrel on Wednesday after data showed supplies fell far more than expected.
In the space I like the OIH and nat gas equities, says Joe Terranova. But I would not play the underlying commodities.
Elsewhere in the commodities space, copper and other metals were rocking after news that China foreign-exchange reserves rose to more than $2 trillion as investors pumped money into the country. Many investors believe China will diversify some of these reserves into strategic resources like metals.
I’d play Bucyrus and Joy Global, adds Pete Najarian. If China and India show growth it should boost the mining and equipment names.
BREAKING NEWS: CIT
Federal regulators are nearing a decision on aiding troubled lender CIT Group, CNBC’s Maria Bartiromo tells the Fast Money desk, and a resolution over CIT's funding issues is expected either later Wednesday or by Thursday morning.
Shares of CIT were halted late Wednesday pending news. The shares were trading at $1.64 when they were halted at 3:19 pm New York time.
CIT, a lender to thousands of small and mid-sized businesses, is in round- the-clock discussions with all three financial regulators—the Treasury, Federal Reserve and Federal Deposit Insurance Corporation—about how to resolve a severe shortage of cash.
> Click here for the very latest on CIT
EARNINGS EDGE: JPMORGAN
Shares of JPMorgan closed higher Wednesday as banking analyst Richard Bove said the bank is likely to follow Goldman Sachs in reporting better-than-expected earnings.
JPMorgan, which is scheduled to issue its second-quarter report on Thursday, will be the second major Wall Street bank to post quarterly results, after Goldman Sachs on Tuesday.
Bove, of Rochdale Securities, believes JPMorgan will see ongoing improvement in its capital markets business, thanks to Wall Street's spring rally and the recovering credit markets.
"The strong earnings performance of Goldman Sachs' capital market operations in the second quarter suggests that JPMorgan's second quarter results may also be above expectations," Bove wrote in a note to clients on Wednesday.
Analysts polled by Thomson Reuters, on average, are expecting earnings of 4 cents per share during the quarter.
Bove said the bank is also likely to benefit from solid fixed income, currency and commodities trading. All of these markets have been volatile, and so have seen increased activity, in the wake of the improving sentiment on the economy early in the second quarter.
The bank's "Achilles Heel," Bove said, is its traditional retail banking operations, which are at risk of seeing increased loan losses as consumers struggle to pay off their debt amid the ongoing recession.
What's the bank trade?
If JPMorgan comes out strong I think Bank of America could also go higher, speculates Karen Finerman. But Goldman put up such a strong number the bar is set very high.
> JPMorgan shares gain ahead of earnings report
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Trader disclosure: On July 15th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (AAPL), (BAC), (DRYS), (EEM), (FXI), (MON), (POT); Seygem Asset Management Owns (NOK) Calls; Finerman's Firm Owns (BAC) Preferred Shares, Finerman Owns (BAC) Preferred Shares And Owns (BAC); Finerman's Firm Owns (WFC) Preferred Shares And Is Short (WFC), Finerman Owns (WFC) Preferred Shares; Finerman's Firm Owns (CSCO), (MSFT), (YUM), (HPQ); Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM), (CAKE), (CPKI), (USO); Najarian Owns (CSCO) Call Spread; Najarian Owns (GE) Calls; Najarian Owns (JPM) And Is Short (JPM) Calls; Najarian Owns (JPM) Call Spread; Najarian Owns (MCD) Call Spread; Najarian Owns (MFE) Calls; Najarian Owns (MOS) Call Spread; Najarian Owns (MS) Call Spread; Najarian Owns (MSFT) And Is Short (MSFT) Call; Najarian Owns (PALM) Call Spread; Najarian Owns (XLF) Call Spread; Najarian Owns (YHOO) Call Spread; Najarian Owns (DELL) Calls; Najarian Owns (INTC) Calls; Najarian Owns (ORCL) Calls; Terranova Owns (TER), (RIMM), (MSFT), (SUN), (FTO); Terranova Owns (CCE) Calls
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