Halftime Report: Trading In The Wake Of The Fed Statement
Both the Dow and S&P 500 traded higher on Wednesday after upbeat economic data and a dip in the U.S. dollar lifted stocks broadly.
Now the Fast Money traders, as well as the rest of Wall Street, are eagerly awaiting the Fed Statement due Wednesday afternoon; everyone will be listening closely for hints of rate increases being needed sooner than expected.
The market is particularly jittery about inflation, especially after government data showed U.S. producer prices jumped a surprising 1.8 percent, and industrial output rose firmly.
What must you know to trade in the wake of the Fed decision?
Strategy Session with the Fast Money traders
The market likes to buy the rumor and sell the news, explains Steve Grasso of Stuart Frankel. Expect the market to rally into the meeting and then sell-off immediately following.
And according to Baryini, says host Melissa Lee, on average since the last 7 Fed decision days, ahead of the decision the S&P is up 73% of the time gaining 1.4% on the session, however after the decision is announced the market is down 60% of the time. That means make your bullish moves before the statement is read.
I’m longTBT and long the dollar coming into the decision, says Brian Kelly of Kanundrum. I don’t think they’re going to increase quantitative easing or increase their balance sheet. That means a reduction of money supply and as a result interest rates should go higher in the long-term.
Outside the Fed decision -- if you're looking for a trade, look at the banks, counsels Danielle Hughes of Divine Capital, especially those that pay a nice dividend yield. I expect to see a nice bump in those banks into next year.
I’m moderately bearish on the broad market through the end of the year, reveals Jared Levy of Peak6. I think the smart way to play it is to sell covered calls on the broad market indexes for all the stocks that you own.
CITI DOWN AHEAD OF SHARE OFFERING
Shares of Citigroup traded lower on Wednesday as the Street awaited pricing, ahead of a $20 billion stock offering.
Meanwhile, the banking behemoth said on Tuesday the Abu Dhabi Investment Authority filed a claim, accusing it of misrepresentation in transactions valued around $7.5 billion.
What’s the trade?
I’m a buyer of this stock with a 4-handle, says Steve Grasso, but that’s to hold for the next 5 years.
In the sector I’d put money to work in JPMorgan or Goldman , counters Jared Levy.
I’m long Citi, reveals Danielle Hughes. But I look at it as a lottery ticket.
JOY GLOBAL REPORTS EARNINGS BEAT
On Wednesday mining equipment maker Joy Global posted a 5 percent rise in quarterly profit, helped by tighter cost controls, and said order rates would improve in 2010.
The company’s outlook was also bullish; it expects copper, international coal, iron ore and oil sands to have the greatest potential for original equipment orders during 2010.
What’s the trade?
I’m not a buyer of Joy Global at these levels, says Pete Najarian. In fact I’m a seller of the good news. But on a pullback, then I’m a buyer again for the long term.
FAST & FURIOUS: THE KEY QUESTIONS INTO THE CLOSE
BUY GE? After Goldman and JPMorgan increased their price targets on GE is it time to buy?
I’m a buyer, says Steve Grasso.
I own this stock and I think it goes higher, says Brian Kelly.
BUY FDX? With FedEx set to report earnings ahead of the bell tomorrow, should you buy?
I’m a seller of the 95-calls against stock that you own, counsels Jared Levy.
BUY HOV? With Hovnanian set to report earnings after the bell, should you buy?
I’m long Hovnanian, says Brian Kelly. House prices have never been more affordable since 1992.
BUY CRUISE LINES? JPMorgan upgraded Carnival and Royal Caribbean; should you buy?
I’m not a buyer, says Danielle Hughes. With unemployment at 10% and people with jobs working even more, I don't think we're in a good enviroment for cruise lines.
TRADE TO GO: POTASH
I’m a fan of Potash, says Brian Kelly. Commodities are soaring but Potash has dipped because China is rumored to be renegotiating lower prices. I think this is a buying opportunity.
CALL THE CLOSE
Steve Grasso: I’m a buyer
Jared Levy: I’m selling covered calls.
Brian Kelly: I’m a buyer.
Danielle Hughes: I’m not doing anything; maybe selling into window dressing.
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Trader disclosure: On December 16th, 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 (AA), (FXI), (INTC), (PBR); Najarian Owns (AAPL) Calls; Najarian Owns (DELL) Calls; Najarian Owns (FCX) Call Spread; Najarian Owns (GE) Calls; Najarian Owns (RIMM) Calls; Terranova Works For (VRTS)
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