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Will RIM Drag Down Stocks, Friday?

In the after hours, investors poured over disappointing results from RIM trying to determine their impact on Friday’s market action.

Although the Blackberry maker reported a profit that rose over last year and topped expectations, sales fell short of forecasts and the company’s stock plunged nearly 10% in late trading.

What must you know?

RIM did in fact beat on the bottom line, reporting $1.03 against the $1 Wall Street was looking for, explains CNBC’s Jim Goldman. And the company's 44.1 percent gross margin was also better than expected and encouraging. But that good news came on lighter than expected revenue with RIM reporting $3.53 billion versus the $3.6 billion consensus. And the numbers go downhill from there: The 3.8 million subscribers comes against the 4.1 million expected; the 8.3 million Blackberrys shipped contrasts sharply with the 8.7 million analysts anticipated.

And looking at Third Quarter guidance, the news gets even more dismal, at least as far as RIM's historical performance is concerned: RIM is offering an EPS range of $1 to $1.08. Analysts were expecting $1.05. The revenue range from the company is now $3.6 billion to $3.85 billion, which falls well below the consensus estimate of $3.9 billion. RIM also expects 4 million to 4.3 million new subscribers, which is again lower than the 4.3 million Wall Street was looking for.

What’s the trade?

RIMM AFTER PREVIOUS REPORTS (AVG. 2005-PRESENT)

DAY-AFTER EARNINGS ONE WEEK LATER
BEAT: +6.8% +0.85%
MISS: -7.6% -5.7%

Source: Birinyi Associates

I think RIM will trade with a $60-handle, muses Guy Adami, especially if the tape is heading lower, which I think it is.

Jabil Circuit could also take a hit as a supplier to RIM, adds Joe Terranova. As for the broad market there could be significant selling pressure in the market on Friday. I’ll be watching 1010 which was a point of resistance.

I wouldn’t be surprised to see a sell-off in RIM and perhaps broadly on Friday, says Karen Finerman, but that’s okay.

I agree, echoes Tim Seymour. But I think the stock was set up to fail.

Looking for more on RIM?

> Click here for complete coverage of RIM earnings

> Click here for Jim Goldman’s full analysis of RIM earnings

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BREAKING NEWS: HEWLETT-PACKARD

Hewlett-Packard says revenue and profit in its next fiscal year should be in line with what analysts were expecting.

The technology company's chief financial officer, Cathie Lesjak, told financial analysts Thursday that revenue should be between $117 billion and $118 billion in fiscal 2010. Its current fiscal year ends in October.

What's the trade?

I think Hewlett-Packard is fairly priced, says Guy Adami. Over the long-term I think it moves higher.

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BEARS TAKING OVER?

Stocks fell on Thursday after a surprise decline in existing home sales led to speculation that the economic recovery may be bumpy, at best.

Sentiment was also dampened by several major central banks, which said they would scale back injections of U.S. dollars into their banking systems.

The losses drove the benchmark S&P 500, which has rallied nearly 60 percent in six months from 12-year lows, to its worst two-day drop in three weeks as investors pummeled stocks across the board.

All 10 S&P 500 sectors fell, with materials, energy, financials and industrials faring the worst.

What’s the trade?

There was no positive bounce on Thursday which isn’t good after a day like Wednesday when everything reversed, lower. I think the market just showed its hand and in 6-weeks we’ll look back at this week as the watershed moment. I expect next month at this time the S&P will be much lower

I think the correction is a healthy thing, counters Joe Terranova. By the end of the year I expect the market to revisit its highs.

Personally, I didn’t think the housing numbers were terrible, but it seems like sellers wanted to push the market lower, muses Tim Seymour. I'm watching 1035 which is the 20-day. If we break that I'll be worried.

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OIL SLAUGHTER, DAY TWO

U.S. crude oil futures fell to their lowest level in five weeks on Thursday as weak home sales suggested the road to economic recovery will be bumpy, at best. This marks the second day the bears have dominated the oil market with a surprise increase in oil supply earlier in the week triggering strong selling.

However, one commodity that bucked the negative momentum was nat gas , which climbed Thursday.

What’s the trade?

Oil cracked the 100-day moving average for the first time since the first quarter, explains Joe Terranova. But I still wouldn’t short oil. Instead, I think the energy trade is long nat gas and I’d play it with the nat gas equity names such as EOG or XTO .

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COMMODITIES CLOCKED

The stronger dollar dragged down shares of natural resources companies as well as most commodity prices. Spot gold prices fell below $1,000 an ounce while miners such as Freeport McMoRan slipped lower.

What’s the trade?

Inventories in copper have increased dramatically so it doesn’t surprise me that FreeportMcMoRan sold-off, explains Tim Seymour.

I’m watching gold, says Guy Adami. If I was long, which I’m not, I’d be terrified.

In the space I’m a buyer of JoyGlobal and Bucyrus on a pullback, says Joe Terranova. And I’d be careful of Alcoa because there’s an excess supply of aluminum

I’m also worried about more downside in gold, says Karen Finerman, because $1,000 is such an important psychological level.

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STREET FIGHT: CHINA NOT LEADING THIS RECOVERY ANYMORE?

You’ve heard that the stimulus in China is working wonders, right? Ask anybody and they’ll tell you that China will lead the economic recovery.

Well not so fast. Steve Cortes of Veracruz says China is losing momentum and the nation’s stock market is poised for a sell-off.

Intrigued? Get the scoop. Watch the video now!




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Trader disclosure: On Sept. 24th, 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), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Terranova Owns (F); Terranova Owns (F) Calls And (F) Puts; Terranova Works For (VRTS); 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 Owns (RIG); Finerman's Firm Owns (MSFT), (NOK), (PBR), (WMT), (RIG), (TGT); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO); Seymour Owns (AAPL), (AA), (BX), (EEM), (RIMM), (BAC), (RIG), (SBUX), (FXI)

For Steve Cortes
Cortes Is Short (FXI)
Cortes Owns S&P Futures
Cortes Is Short The Euro
Cortes Is Short British Pound

For Mark Mahaney
Citigroup Has Received Compensation From (GOOG)
(GOOG) Has Been A Client of Citigroup In Past 12 Months
Citi Is A Market Maker In Shares Of (GOOG)



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