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Halftime Report: Play Ag on China, Crops?

Stocks paused Monday after a week of gains as nervous investors braced for the start of earnings season; the worry is whether profits and outlooks will be strong enough to extend the market's advance.

However, industrials moved higher on reports that China’s imports blew past expectations, providing fresh evidence that China’s growth is surging.

Also a highly anticipated crop report due Tuesday sent ag related names higher with Potash and Mosaic hitting 52-week highs before rolling over.

What should you be watching?

I’m focused on the US crop report due Tuesday; it will say a lot about the corn crop and wheat crop, explains strategic investor Dennis Gartman. Strength in fertilizer prices are dependent on that report. I’m looking to hear how big is last year’s crop? How much has been left in the field? How strong are the farmers going to be?

It’s been a pretty good year for farmers, he adds, and given that level, their propensity to buy more fertilizer for their crops next year should be pretty large.

Taking a look at Caterpillar, that stock hit levels not seen in about 16-months, adds Zach Karabell of RiverTwice. I like that name, not just for ag, but for its exposure to the global industrial story.

More than half of Caterpillar sales are international adds, Mike Khow of Cantor Fitzgerald. However it’s a stock that’s had a heck of a rally.

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TAKE YOUR POSITION: ALCOA

Investors are bracing for the start of earnings season, with Alcoa scheduled to report fourth-quarter results Monday.

Analysts surveyed by Thomson Reuters on average predict Alcoa will earn 6 cents a share on revenue of $4.8 billion in the fourth quarter, which ended Dec. 31.

What’s the trade?

Last week Citi said to lighten up on your Alcoa position and I think that’s good advice, says Jon Najarian.

Options action suggests shares could move around 8% in either direction, adds Mike Khouw.

It’s great that Alcoa has gone from $12 – $18 but don’t look at this stock as a bellwether for global commodities, counsels Zach Karabell.

In the near term I think the report will be positive, says Joe Terranova. However, longer term I’m bearish on aluminum prices.

I’d stay away from this stock, counsels Dennis Gartman.

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FEE ON BANKS TO RECOUP BAILOUT FUNDS

The Bank ETF traded modestly lower on Monday after the WSJ reported that the Obama administration is considering levying a fee on banks to recoup more of the taxpayer funds spent to rescue the financial system.

The paper also said, the proposal is still subject to discussion and no final decision has been made as to what form it might take.

What must you know?

I’m much more concerned about backlash over bonus season, adds Zach Karabell. If bonuses get out of hand in an election year, Wall Street is an easy target.

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FAST & FURIOUS: THE KEY QUESTIONS INTO THE CLOSE

BUY KB HOMES? With KB Homes scheduled to report earnings Tuesday, how should you game the stock? -- I’m not bullish on KB at this level, says Jon Najarian.

BUY CHARLES SCHWAB? With online broker Charles Schwab scheduled to report earnings on Thursday, what’s the trade? -- I would not be a buyer on earnings, says Zach Karabell.

BUY INTEL? With Intel reporting earnings on Thursday, what’s the trade? -- I’m bullish, says Mike Khouw.

BUY JPMORGAN? Ahead of JPMorgan earnings on Friday, what’s the trade? – -- I’m a buyer, says Joe Terranova

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CALL THE CLOSE

Mike Khouw: I’d stay in it.

Zach Karabell: I’m positive.

Jon Najarian: I’m positive into the close.


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