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Halftime Report: Amid Earnings Deluge, Which Results Really Matter?

Wednesday, 14 Oct 2009 | 1:16 PM ET

Bulls are hoping that this could be the day the Dow crosses 10,000 with positive momentum stemming from stronger than expected earnings from JPMorgan , Intel and CSX , as well as better than expected retail sales.

"It's a really good start. These are major companies coming out with what looks to be surprisingly good news." says Eric Kuby, chief investment officer for North Star Investment Management Corp.

The boost put indexes in striking distance of new highs for the year, with the Dow industrials poised to retake the psychologically important 10,000-level for the first time since October 2008.

Fast Money Halftime Report
Melissa Lee and the Fast Money traders weigh in on the markets and share their midday trading advice.

What should you be watching?

Of all the data mentioned above, it’s the numbers from JPMorgan that mean the most to me, says Tim Seymour. I think we see banks to rally in sympathy. However I’m still bearish on Citigroup.

I’m more focused on numbers from Intel , counters Danielle Hughes of Divine Capital. Sure banks turned profits with all that ‘free’ money but Intel showed growth. Their earnings suggest the chip industry is about to explode and that means job creation.

I’m encouraged by results from Abbot Labs and Black & Decker, adds OptionMonster Jon Najarian. Both beat on sales. That’s bullish. It shows the market that it’s not just cost cutting that’s driving earnings. That’s my big take-away.

I’d forget about Dow 10,000. On The Dow I think the key levels to watch is 10,300, adds Carter Worth of Oppenheimer.

Investors in the options pits appear to still be bullish, explains Jared Levy of Peak 6. I’m seeing investors moving protection forward. And in terms of the financials I expect Goldman to have a strong quarter.

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JP MORGAN SETS TONE FOR OTHER BANKS

As we mentioned above shares of JPMorgan drove the Dow higher on Wednesday after quarterly profit rocketed to a forecast-beating $3.6 billion.

Most of JPMorgan's banking revenue gains came from bond trading, where rising asset values have helped Wall Street firms all year. Stock and bond underwriting revenue also rose jumped.

The investment bank reported net income of $1.9 billion, compared with $882 million a year earlier. That increase came in part from gains of $400 million on leveraged loans and mortgage-related securities that had a $3.6 billion writedown in the year-earlier quarter.

Trading gains lifted fixed income markets revenue to an eye-popping $5 billion, up from about $800 million a year earlier. Stock underwriting revenue rose 31 percent to $681 million, and bond underwriting fees rose 19 percent to $593 million.

Of all that data, perhaps most important to note is that investment banking drove JPMorgan's results, and that should bode well for other large banks due to report later this week, including Goldman Sachs and Citigroup.

How should you be positioned ahead of the numbers?

I’m worried about Citigroup, says Tim Seymour. They had to sell some of their best assets such as Phibro. I’m cautious.

As for Goldman, I expect good numbers, adds Danielle Hughes. But will they move the market – I’m not so sure. If I owned Goldman I would buy put protection.

INTEL LEADS TECH SURGE

As we mentioned above, shares of Intel surged on Wednesday after analysts raised their price targets for the stock following a quarterly earnings report and revenue forecast that blew past expectations, giving investors hope of a tech sector recovery.

UBS raised its price target for Intel shares to $27 from $24 after the report while Lazard upped its price target to $26 from $24.

"Intel is benefiting from strong demand for retail notebooks and Nehalem servers. With better control of costs and prices, we see a structural improvement in Intel's margin profile," Needham & Co analyst Edwin Mok said in a research note in which he announced a price target increase to $28.

Related stocks are also climbing with computer maker Dell and Microsoft both higher on Intel’s strong results. Technology investors appear to be betting on a boost in computer sales after Microsoft releases its upcoming Windows 7 computer operating system on Oct. 22.

What’s the tech trade?

With blow out numbers, strong margins and strong guidance I’m a buyer of Intel, says Tim Seymour.

I think the day 2 trade is now companies that could be takeover targets because of strength in this sector, muses Jon Najarian. ITT is a name to watch, he says. It’s not high technology but they are involved in moving water.

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CALL THE CLOSE

Tim Seymour: I expect the S&P to hold 1080 and I think we ride higher into the week.

Danielle Hughes: I’m a buyer. I think the euphoria will push the market higher.

Jon Najarian: I think we sell off and I’m a buyer on the dip, tomorrow.


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Trader disclosure: On October 14, 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), (NUE): Grasso Owns (AAPL), (ABK), (ASTM), (BAC), (C), (COST), (CSCO), (PFE), (PRST), (V), (WMT): Seymour Owns (AAPL), (BAC), (BHP), (EEM), (FXI), (INTC), (TTM), (LVS): Pete Najarian Owns (BX) Calls: Pete Najarian Owns (DELL) Call Spread: Pete Najarian Owns (HOG) Nov. Call, Is Short (HOG) Oct. Calls: Pete Najarian Owns (XLF) Calls: Pete Najarian Owns (YHOO) Call Spread: Pete Najarian Owns (LAZ), (LAZ) Puts: Pete Najarian Owns (C) Calls

For Steve Grasso
Stuart Frankel And/Or Its Partners Own (AIZ)
Stuart Frankel And/Or Its Partners Own (CMCSK)
Stuart Frankel And/Or Its Partners Own (CUBA)
Stuart Frankel And/Or Its Partners Own (GERN)
Stuart Frankel And/Or Its Partners Own (HSPO)
Stuart Frankel And/Or Its Partners Own (MSFT)
Stuart Frankel And/Or Its Partners Own (NWS.A)
Stuart Frankel And/Or Its Partners Own (NXST)
Stuart Frankel And/Or Its Partners Own (NYX)
Stuart Frankel And/Or Its Partners Own (PDE)
Stuart Frankel And/Or Its Partners Own (PRST)
Stuart Frankel And/Or Its Partners Own (RDC)
Stuart Frankel And/Or Its Partners Own (ROK)
Stuart Frankel And/Or Its Partners Own (TLM)
Stuart Frankel And/Or Its Partners Own (XOM)
Stuart Frankel And/Or Its Partners Own (XRX)
Stuart Frankel And/Or Its Partners Own (SDS)
Stuart Frankel And/Or Its Partners Is Short (QQQQ)
Stuart Frankel And/Or Its Partners Is Short (CL)

For Jon Najarian:
Jon Najarian Owns (GS)
Jon Najarian Owns (BAC) Preferreds

For Mark Mahaney
Citigroup Global Markets Or Affiliates Owns 1% Or More Of (YHOO), (PCLN), (NFLX), (AKAM)
Citigroup Global Markets Or Affiliate Received Non-Investment Banking
Compensation From (GOOG), (YHOO), (EXPE) In Past 12 Months
(GOOG), (YHOO), (EXPE) Are Or In Past 12 Months Were Clients Of Citigroup
Global Markets (Non-Investment Banking, Non-Securities Related)
(GOOG), (YHOO) Are Or In Past 12 Months Were Clients Of Citigroup Global Markets (Non-Investment-Banking, Securities-Related)
Citigroup Global Markets Is A Market Maker In (OPEN), (GOOG), (YHOO), (AMZN), (PCLN), (NFLX), (EXPE), (AKAM)
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Funds Managed By Navellier Own (VMI)

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