Both the S&P and Dow sold-off Wednesday as comments from the Federal Reserve reminded investors that at some point the economy will have to stand-up on its own.
Initially stocks rose sharply following the Fed's comment that economic activity was picking up, but in the last hour of trading the market reversed course as investors fretted about the timing of the removal of some of the Fed's stimulus.
Although the Fed kept interest rates unchanged, they also talked about slowing purchases of mortgage debt. That was seen as a step toward a measured withdrawal.
Among the casualties were banks, housing stocks and energy shares.
The other worry was the Fed's vow that interest rates will stay low for an extended time, which makes it tougher for banks to make money. Also the market's run-up of nearly 60 percent over six months might have also caused some investors to use the Fed's statement as reason to book profits.
How should you be positioned now?
I don’t read a lot into the sell-off, says Karen Finerman. Wednesday’s move just takes stocks back to where they were on Monday. At the end of the day there were no surprises out of the Fed meeting.
Also there was never any panic, echoes Pete Najarian. Just look at the volatility .
I found the Fed statement to be bullish, says Joe Terranova. Low interest rates create a great environment for growth. But the market obviously didn’t see it that way.
I think the market has gotten use to the Fed stimulus, adds Tim Seymour. It’s like a crack pipe and the Fed said at some point it’s going away. But the market can survive without it. I don’t think the pullback is a big surprise or that it means the rally is over.
U.S. crude futures tumbled on Wednesday after government data showed a surprisingly large increase in supplies.
"Today's data certainly was on the bearish side across the board. Crude builds are largely the result of lower refinery utilization and stronger-than-expected imports," says Chris Jarvis, senior analyst at Caprock Risk Management.
What’s the trade?
As far as I’m concerned there’s more upside potential in nat gas than oil, says Joe Terranova. I’d play it with Apache or EOG as companies exposed to nat gas but for the long-term.
I’ve noticed a divergence between the spot price of nat gas and the UNG, adds Karen Finerman. I’d be careful. If you want exposure I’d do it with Chesapeake .
Oil broke some important trend lines, says Tim Seymour. I think we could have a few more days of weakness. I wouldn’t run into the space right now.
Oil seems to be grinding in a range, says Pete Najarian. It seems oil at $70 is the new norm. But as far as I’m concerned the best energy trade is long coal .
TOPPING THE TAPE: TECH OUTPERFORMS
It appears investors remain bullish on tech with Apple , Western Digital and other names all making intraday 52-week highs.
Seagate also made headlines on Wednesday after the company signaled improving demand for its hard-disk drives and hiked its quarterly sales forecast.
The new forecast dovetails with other signs of improving personal computer demand. Paul Otellini, CEO of Intel , the world's largest supplier of chips for the computer industry, said Tuesday that worldwide PC sales are making a quick comeback.
What’s the tech trade?
I’m bullish on Intel long-term, adds Pete Najarian. And I’ve got my eye on RIM , he adds. The stock has made a huge move ahead of earnings.
I’m watching the PC upgrade cycle, explains Joe Terranova. Names that benefit from renewed IT spending are names I’d be in. I expect to see growth coming from this sector.
AFTER HOURS ACTION: RED HAT
In extended trade Red Hat moved higher after the company reported higher fiscal second-quarter profit on Wednesday, helped by higher sales of its open-source software subscriptions and a one-time tax benefit.
The world's biggest provider of Linux software reported net quarterly profit of $28.9 million, or 15 cents per share, compared with $21.1 million, or 10 cents per share, in the year-ago quarter.
OPTIONS ACTION: ELECTRONIC ARTS
Pete Najarian has spotted unusual options activity in Electronic Arts. Market speculation suggests Microsoft may be interested in acquiring the company.
What’s must you know?
The stock has underperformed and they’ve got a great balance sheet but they’ve had a hard time showing profits, explains Najarian.
STORY OF THE DAY: WHAT DID FED DO WRONG?
As we said above, both the S&P and Dow fell Wednesday with the sell-off largely triggered by comments from the Federal Reserve.
How is strategic investor Dennis Gartman positioning himself in the wake of the Fed meeting?Find out! Watch the video now!
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Trader disclosure: On Sept. 23rd, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Terranova Owns (F); Terranova Owns (F) Calls And (F) Puts; Terranova Works For (VRTS); Najarian Owns (ACI) Call Spread; Najarian Owns (C) Calls; Najarian Owns (DELL) Call Spread; Najarian Owns (ERTS) Call Spread; Najarian Owns (GE) Calls; Najarian Owns (JPM) And Is Short (JPM) Calls; Najarian Owns (MS) And Is Short (MS) Calls; Najarian Owns (MSFT) And Is Short (MSFT) Calls; Najarian Owns (PALM) Calls; Najarian Owns (ORCL); Najarian Owns (TEVA); Najarian Owns (V) And (V) Calls; Najarian Owns (WFC) Put Spread; Najarian Owns (YHOO) Call Spread; Finerman's Firm Owns (MSFT), (NOK), (PBR), (WMT), (RIG), (TGT), (BDX); Finerman's Firm Owns (BAC) Preferred Shares, Finerman Owns (BAC) Preferred Shares And Owns (BAC); Finerman Owns (RIG); Finerman's Firm Owns (WFC) Preferred Shares And Is Short (WFC); Finerman Owns (WFC) Preferred Shares; Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO); Seymour Owns (AAPL), (BAC), (RIG), (SBUX), (FXI), (F), (TTM)
For Jim Suva
Citigroup Owns (PALM)
Citigroup Has Received Compensation From (PALM)
Citigroup Is A Market Market In Securities of (PALM)
Citigroup Is A Market Market In Securities of (RIMM)
For Dennis Gartman
Gartman Owns Gold
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