Halftime Report: Is Friday’s Sell-Off Bullish For Banks?

The latest earnings report spooked bulls and slammed stocks on Friday after JPMorgan results raised concerns about the industry as a whole.

Although JPMorgan’s quarterly profits soared to $3.3 billion, topping expectations, the bank reported deep losses on mortgage and credit card loans in the fourth quarter, dashing hopes that consumer credit is on the mend.

Those results dragged down rivals Bank of America and Wells Fargo; both of whom report next week.

In fact a number of widely followed banks report earnings next week:

Tuesday: Citigroup
Wednesday: BofA, Morgan Stanley, Wells, USB
Thursday: Goldman, Fifth Third, Key Banc
Friday: BB&T

Is Friday's action in bank stocks a sign of things to come?

Instant Insights with the Fast Money traders

I’m wondering if the bears are getting it all out of the way, muses Steve Grasso of Stuart Frankel. They’re selling the financials hard but I think we might see a little bit of a pop next week. Remember we have a 3-day weekend and I think investors are getting out of bank stocks because they don’t want to get caught by surprise over the holiday. And the government surprised investors this week with the proposed TARP tax.

I agree that some of the selling on Friday stems from unknowns surrounding a TARP tax, adds Jon Najarian. It’s an excuse to go to the sidelines. But some of the selloff also stems from concerns raised by JPMorgan results – especially in consumer credit.

Elsewhere in the space, I’m seeing a large volume of Feb 29 puts trading in Morgan Stanley, says Scott Nations of NationShares. But I can’t say if it’s bearish or protection.

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TAKE YOUR POSITION: CITI

Ahead of Tuesday earnings, the traders are closely watching the action in Citigroup. Shares are down about 30% in the past three months.

I’m a buyer of Citi on the pullback, says Steve Grasso, but as a long-term investment.

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TECH BIG LOSER: INTEL GIVES UP ALL GAINS

Despite reporting earnings that ‘crushed it’ on Thursday shares of Intel gave up their gains – with the stock remaining stuck around $21, a point of technical resistance.

What does the action mean for IBM scheduled to report on Tuesday?

I think momentum may be on your side in IBM short-term, says Steve Grasso, but I think the stock runs out of steam.

In the space I’m watching CREE, says Jon Najarian. There’s been a large amount of selling in that stock and I’m short. However I’m a buyer of AMAT on the dip.

I can’t see investing in any chip names, adds Scott Nations. I’d even avoid AMD despite the upgrade. The PC upgrade cycle is priced in.

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DOLLAR RALLY

The U.S. dollar rose broadly on Friday helped by data showing a rise in manufacturing and stable consumer price inflation, while concerns about the struggling Greek economy weighed on the euro.

Market confidence in Greece has fallen as its deficit has ballooned and credit ratings have been cut.

"What is really crushing the euro is additional concern about the serviceability of the massive amount of debt rung up in Greece," says Dan Cook, a senior market analyst at IG Markets. Until the issue is resolved "we will likely see a lot of selling pressure on the euro," he adds.

What’s the trade?

On one side we’ve got euro selling but on the other side we’ve got yen buying so be careful of playing the Dollar Index, counsels Todd Gordon. It’s being torn in two direction.

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STRONG DOLLAR SENDS COMMODITIES LOWER

Meanwhile the stronger dollar dragged down oil prices on Friday to around $79 per barrel. Also, warmer weather this week in much of the nation has reduced forecasts for fuel consumption.

Also, gold fell to around $1,130 per ounce on Friday as a rising dollar made the metal costlier for non-U.S. investors.

What’s the trade?

I’m long gold, admits Brian Kelly of Kanundrum, but I’m not excited about buying it on Friday. I think the play in commodities is to protect profits.

In commodities I’m watching Mosaic , Agrium , and Monsanto, but I’m not a buyer yet, says Jon Najarian. I think we’ll see attractive entry points in the middle of next week.

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TRADE TO GO: TECH

Scott Nations suggests putting Amazon on your radar. “It’s back above $128 and looks like it wants to go to $140,” he says.

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CALL THE CLOSE

Steve Grasso: I’m a seller.

Todd Gordon: I think 1135 is a good point to sell.

Jon Najarian: I don’t like the market here.

Scott Nations: I’m a seller.

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Trader disclosure: On Jan 15th, 2010, 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 (AAPL), (AET), (BAC), (INTC), (VIP); Finerman's Firm Is Short (IYR), (MDY), (SPY), (IWM), (USO); Finerman Owns (AAPL); Finerman's Firm Owns (BAC), (BAC) Leaps; Finerman Owns (BAC) Preferred, (BAC); Finerman's Firm And Finerman Own (GOOG); Finerman's Firm Owns (MSFT), (NOK); Finerman's Firm And Finerman Own (WFC) Preferred; Pete Najarian Owns (CELG); Pete Najarian Owns (FCX), Is Short (FCX) Calls; Pete Najarian Owns (HUM) Call Spread; Pete Najarian Owns (MS); Pete Najarian Owns (PFE); Pete Najarian Owns (QCOM) Calls; Pete Najarian Owns (TEVA); Pete Najarian Owns (TXT) Call Spread; Pete Najarian Owns (XLF) Calls

For Brian Stutland
Stutland Owns (IBM) Feb. Calls, Is Short (IBM) Puts
Stutland's Firm Is A VIX Market Maker
Stutland's Firm Is Short Volatility
Stutland Owns (GS) Call Spread
Stutland Owns (GS) Corporate Bond

For Jon Najarian
Jon Najarian Owns (HUM) Calls
Jon Najarian Owns (AET)

For Brian Kelly
Kanundram Capital Is Short EURSD
Kelly Owns (FXE) Puts

For Jon Najarian
Jon Najarian Owned (HUM) Calls Today

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