S&P 500 STALLED AFTER 9-MONTH HIGH
Both the S&P and Dow closed lower on Tuesday despite a report that showed home prices in major metropolitan markets rose 0.5 percent compared with the previous month, the first monthly gain since the middle of 2006.
The bulls just couldn’t drive the market beyond its 9-month high, with investor sentiment taking its cue from a drop in consumer confidence, a decline in profit at Viacom and a loss posted by Valero.
How much farther can the rally go?
Strategy Session with the Fast Money traders
It seems to me a correction is coming, speculates Guy Adami. Advancing 100 S&P points in only 2 weeks is much too much. I’m a seller.
I disagree, counters Joe Terranova. The market won’t go out like this. Look for high volume with an intra-day reversal – that’s when you know the run is over.
I’d be amazed if we see a big pullback, adds Tim Seymour. It don’t expect the pullback will be more than 5%. But I also don’t see the market moving much higher without a big catalyst.
It seems the market goes up on any news, muses Karen Finerman. It’s just digesting everything whether it’s good or bad. I find that amazing.
CHART OF DAY: DOLLAR
The dollar rebounded on Tuesday from its lowest level this year against a basket of currencies as a drop in U.S. consumer confidence fueled worries about the economy, enhancing the greenback's safe-haven appeal.
What must you know?
I expect to see more dollar strength in the short-term, says Tim Seymour. But don’t forget the dollar rallies when traders get scared.
If the dollar continues to strengthen I think gold goes below $900, adds Guy Adami.
If the dollar remains strong, expect to see the energy sector roll over, adds Joe Terranova.
A weak report from Valero dragged down the energy sector after the refiner reported a second-quarter loss citing weak demand.
Meanwhile BP shares plunged after the company said lower oil prices and weak refining margins ate into profits.
Also, the price of crude dropped on Tuesday ending oil’s recent advance. The petroleum markets are backing off from the highs, seemingly prepared to at least take a break from the recent rally, says Tim Evans, analyst at Citi Futures Perspective.
How should you trade energy, now?
I expect to see energy continue to pullback, says Karen Finerman. If you’re looking for a long trade put RIG on your radar, but I’m not a buyer yet.
Speaking of pullbacks, I expect Schlumberger to pullback more, adds Guy Adami, as well as the OIH.
U.S. STEEL DOWN AFTER EARNINGS
Shares of AcerlorMittal and AK Steel closed lower after rival US Steel reported its second consecutive quarterly loss on Tuesday and said it expected all of its business sectors to operate in the red in the third quarter.
I think it’s an opportunity, says Tim Seymour. I’m a buyer of Mittal.
I expect US Steel to correct to $35, adds Guy Adami. But at that level it’s a buy.
TOPPING THE TAPE: HEALTHCARE
Money rotated into the health care sector on Tuesday after generic drug maker Teva predicted earnings growth of 35% in 2010.
Meanwhile, Cowen & Co upgraded Aetna to "outperform" from "neutral", saying it expects the stock to trade at a premium to the sector over the next 12 to 18 months.
Also shares of Amgen popped after the company reported much better-than-expected second-quarter earnings and raised its full-year profit forecast.
What’s the trade?
I’d get out of Amgen ahead of August 13th, counsels Joe Terranova; that's when they go before the FDA.
Put Abbott Labs on your radar. The stock has corrected, explains Guy Adami. At $45 I’d go on the attack. And their major drugs don’t come off patent for quite a while.
All the HMOs were on fire Tuesday, adds Karen Finerman. That concerns me because I still think we could see meaningful healthcare reform.
TECH DEALMAKING PICKS UP
Investors are keeping a close eye on the tech trade with M&A heating up in the space. On Tuesday IBM announced plans to buy business analytics company SPSS Inc for $1.2 billion in cash to better compete with Oracle and other firms in the growing field of business intelligence.
SPSS shareholders will receive $50 a share, a 42 percent premium to Monday's closing price of $35.09 on the Nasdaq.
What’s the tech trade?
I expect to see more M&A in the tech space, says Karen Finerman, but how you pick the right one, I couldn’t tell you.
IBM is at $120, reminds Guy Adami. I like the stock but I wouldn’t pile in at these levels. At $112 I think it’s attractive.
TRADERS TO BLAME FOR OIL SPIKES
Those sharp moves in oil prices last year are taking center stage, once again.
According to a report in the New York Times, the head of the Commodity Futures Trading Commission has raised major concerns that speculators may have played a major role in the wide swings in energy prices over the last few years. As a result, the CFTC may consider expanding its oversight of energy trading.
“I believe we must seriously consider setting strict position limits in the energy markets,” chairman Gary Gensler said at the hearing, which was broadcast over the Web. “Every option must be on the table.”
Meanwhile in breaking news CNBC’s Mary Thompson reveals that CFTC Chairman Gary Gensler has called a published report in the Wall Street Journal on this issue “premature" and "inaccurate".
Wondering what the Fast Money traders have to say about increased oversight? Find out now! Watch the video.
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Trader disclosure: On July 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: Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Seymour Owns (AAPL), (AA), (BAC), (FXI); Seygem Asset Management Is Short (VALE); Seygem Asset Management Is Short (PBR); Finerman's Firm Owns (MSFT), (PM), (SVU); Finerman's Firm And Finerman Own (BAC) Preferred Shares, Finerman Owns (BAC); Finerman's Firm Owns (WFMI) Puts; Finerman's Firm And Finerman Own (WFC) Preferred Shares, Finerman's Firm Is Short (WFC); Finerman's Firm Is Short (USO), (BWA), (IYR), (IJR), (MDY), (SPY), (IWM); Terranova Owns (MSFT), (MCD), (AMZN)
For Joe Terranova:
Terranova Works For (VRTS)
Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.
Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO
Virtus Diversifier PHOLIO Owns (IGE),
Virtus Diversifier PHOLIO Owns (DBC)
Virtus Diversifier PHOLIO Owns (DBV)
Virtus Investment Partners Owns More Than 1% Of (ABD)
Virtus Investment Partners Owns More Than 1% Of (CBL)
Virtus Investment Partners Owns More Than 1% Of (CAL)
Virtus Investment Partners Owns More Than 1% Of (CLB)
Virtus Investment Partners Owns More Than 1% Of (DLR)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (MEE)
Virtus Investment Partners Owns More Than 1% Of (DBC)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (DBA)
Virtus Investment Partners Owns More Than 1% Of St Mary Land & Exploration Co
Virtus Investment Partners Owns More Than 1% Of Seagate Tax Refund Rights
Virtus Investment Partners Owns More Than 1% Of (SKT)
Virtus Investment Partners Owns More Than 1% Of (TNB)
Virtus Investment Partners Owns More Than 1% Of (UA)
Virtus Investment Partners Owns More Than 1% Of (WBMD)
For Patricia Edwards
Edwards Owns (PM)
Storehouse Partners Owns (JNK) For Clients
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