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Halftime Report: Can Earnings Take Stocks To New Highs?

CAN STOCKS MAKE NEW HIGHS?

Strong corporate earnings and reassuring words from Federal Reserve Chairman Ben Bernanke are helping stocks hold most of the gains from their latest rally.

Stocks fluctuated in a narrow range Tuesday as Bernanke told Congress the Fed would be able to withdraw its economic stimulus and prevent a resurgence of inflation when the recovery is more secure.

Meanwhile, corporate news gave fresh support to stocks, as Caterpillar joined other companies in issuing an improved 2009 profit forecast, even as it said its second-quarter profit fell 66 percent on weaker sales.

Companies' reports have largely exceeded expectations so far this earnings season, fostering a renewed sense of optimism in the market and helping to drive the Dow Jones industrials back into the black for the year.

Can this market continue to rally?

Instant Insights from the Fast Money Traders

946 on the S&P is the 2009 high, reminds Steve Grasso and we’re at that level. I’m concerned that we’re ahead of ourselves right now.

The market went up almost 10% over the last two weeks, adds Jeff Tomasulo. Profit taking shouldn’t surprise anyone.

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TAKE YOUR POSITION: APPLE, YAHOO

Technology shares showed weakness with both Yahoo! and Apple trading lower ahead of earnings, Tuesday after the bell.

What’s the tech trade?

Apple may be setting up for a mean reversion, counsels Joe Terranova. In other words, the stock may have gotten so far ahead of itself it has to pullback after earnings.

I’d also be careful with Apple at these levels, counsels Jeff Tomasulo. If they should miss, investors will probably sell the stock hard.


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CONSUMER SHARES WEAK

Consumers discretionary stocks were trading lower after a new UBS report showed parents will spend 8.5% - 12% less this year on back-to-school items than they did last year.

What’s the trade?

I’d look to discounters such as Walmart, TJMaxx or Target , as the winners, counsels Patty Edwards of Storehouse.


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Trader disclosure: On July 21st, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders;

Tomasulo Owns (GS), (WFC), (RIMM), (WAG), (XOM), (HAL), (PRU)
Terranova Owns (TER), (SUN), (FTO), (MSFT)



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AAPL
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DJIA
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S&P 500
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CAT
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TGT
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TJX
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WMT
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SPDR TEC SEL
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SPDR CD SEL
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YHOO
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