HALFTIME REPORT: Where You Can Profit In Today's Rally
After two days of losses, the Dow and S&P 500 have bounced back on Wednesday, virtually breaking even this week ahead of Wednesday's Fed decision. In Wednesday’s session, much of the strength in the market was derived from underperforming sectors earlier in the week, namely, Tech and Financials.
What are the sectors rallying today and what are your best moves right now? Let the Fast Money traders be your guide.
Word On The Street
With market-moving news happening late in the trading day, has the opportunity passed to make profitable plays on Fed announcements and treasury auctions? “I think we’re setting up for a little disappointment,” says Tim Seymour, who doesn’t see anything of note coming out of the auction that the market isn’t already expecting, and sees this rally as somewhat premature. “I’m worried about the afternoon trade,” he says.
With speculation that pre-Fed rally is moving the markets today, Danielle Hughes of Divine Capital sees this morning’s strength as relief, rebounding from Tuesday’s weakness. Noting a dip in market volume, she thinks traders are on the sidelines right now, anticipating an unchanged strategy from the Fed and a possible post-announcement rally.
Patricia Edwards of Storehouse Partners, who yesterday was whole-heartedly bearish on the markets is now a buyer focusing on a few select names today. She likes what she sees from Microsoft and the deal it is drawing up with Nokia , “it’s almost like buying a bank, without the risk,” she says.
However, Jared Levy urges caution in this market, as many of the stocks traders are focusing on are highly tied to the overall indices. “Some of the quality names look good,” he says, but warns of the possibility of a short-term pullback.
Financials Lead The Market Higher
Financials, the sector that was the laggard in yesterday’s trading is seeing strength today, with Morgan Stanley one of the notable names not following the overall trend. “It’s a snap-back from yesterday,” says Tim Seymour, but he urges caution as “the Fed has nothing to do than disappoint today.”
Topping The Tape: Homebuilders
In the homebuilding sector, the big mover is Toll Brothers, whose stocks are surging after net contracts increased for the first time in 4 years and home owners climbed 3% from a year earlier, which stunned analysts that predicted a double-digit decline.
“There are a lot of positive fundamentals,” says Jared Levy pointing out that there is an influx of cover-call action and bearish December call spreads in the options market, talking specifically about the Homebuilders ETF. “Near term, look for a pullback, but I think the long term story is still there,” he says.
If homebuilders are on the rise, logic suggests that there should be some corollary plays in the home-related stocks, names like Home Depot , Lowe's and Ethan Allen . “If I’m going to go there, I’d go with Home Depot,” says Patricia Edwards, who sees strength in the company over the long term, but urges you not to play this name simply for a quick pop.
Tech Sector Strength
With tech names led by Tuesday’s after hours announcement from Applied Materials that delivered better than expected numbers, Tim Seymour likes the company specifically, which shows that there is light at the end of the tunnel for the chip makers.
Two names that Danielle Hughes is watching in this space are Diodes and Microsemi Corp , suggesting names like this must push through with both strong inventory numbers and consumption numbers. “We want to see more growth, not just inventory cutbacks,” she says.
Take Your Position: Wal-Mart
With Wal-Mart set to report earnings ahead of the bell Thursday, the stock is trading higher today, but where do the Fast Money traders stand on the retail giant? “It’s been underloved and undervalued this year” says Patricia Hughes, “you gotta own it!”
“I love Wal-Mart,” says Jared Levy, “If you own it, however, I wouldn’t expect more than a 2-3% move either way. If anything I’d certainly be leaning to the bullish side.”
For more fast analysis on the market and what the options are saying about the big Casino stocks like Las Vegas Sands and Wynn Casinos , check out the video!
Trade To Go:
In today’s trade to go, Tim Seymour is taking a look at Nokia , who recently announced a deal with Microsoft to help compete for market share for the business consumer. “It’s a very important deal for Nokia,” Seymour says, “going after the business community is what this is all about. This is an exciting deal for them.” Seymour sees this deal as great for Nokia, which gives investors an exciting place to enter for this stock, but it’s bad news for Research in Motion.
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CNBC.com with wires