Should You Believe in Retail's Rally?
In Thursday's trading, chatter on the street centers around financials, whether it's Vikram Pandit's Capitol hill testimony, Goldman Sachs hitting a one month high or JPMorgan grabbing the top spot for investment banking fees. The market was also helped by unexpectedly strong retail sales, as stocks were up marginally during intraday trading.
The Fast Money gang has the stories you need to know in order to make the right trades in this market.
Fast Money Strategy Session
Although the stock has been "dead money" over the past six months, Goldman Sachs reached a 1-month high in Thursday's trading, so how can you position yourself with this stock today? Guy Adami points out the "huge" resistance level for the stock at $160 brought out short sellers on Wall Street, but now that the stock has broken through that technical level, his strategy is to "hold on and hope for the ride higher."
As far as options, Jon Najarian is seeing double normal activity in Goldman, mostly bullish in nature, which he sees as a result of the successful Bank of America warrant auction. He thinks that the BAC auction gives an "all clear" signal that a rebound in financials is on the way.
"You got to like Goldman fundamentally," adds Zach Karabell, but he warns that the stock may be a little less easy to decipher. Citigroup, on the other hand, serves to benefit more from a more stable environment, and he suggests that you could see as much as a 20% pop for the stock, even in a flat market. He sees the floor for Citi stock in the range of $3.20 or $3.18 if the market reacts negatively to the government unloading its stake in the company. However, Patty Edwards says that Goldman Sachs is the only stock she'd want to buy in the space, whereas Citigroup is just too much of a gamble, she says.
Topping The Tape: Retail
It appears that the February snowstorms couldn't keep determined consumers from hitting the stores, as unexpectedly strong retail numbers hit this street Thursday. In the wake of the numbers, names like Gap and Target are making gains while Abercrombie and Fitch is seeing its stock move up double digits.
Retail expert Patty Edwards is a little skeptical of the big moves, pointing out that even with store growth, retailers are still hovering at 2006 sales levels. She suggests instead of following these big swings to focus on stocks that have solid operators, which she doesn't see in Abercrombie. Guy Adami agrees that ANF's moves "defy logic" and doesn't think that the comps were good enough to warrant such big moves. Short interest is high in the stock, the traders point out.
Retail Chart of the Day
Following the strength in retailers, the street has seen the three major retail ETFs - Retail Holders , S&P Retail Index and the Consumer Discretionary SPDR - hit 52-week highs, but is retail at large defying the consumer here?
Instead of being in general retail, Zach Karabell suggests being in the specialty retail space, pointing out the Specialty Retail ETF, which has exposure to online marketplaces and the high end consumer. However, he doesn't think that retail as a whole is an "overly interesting, exciting or profitable place to be in."
Big Money: Kohls
One retailer who missed its sales expectation was Kohls, but the store is still attracting trading action and seems to have swung a big block trade that represents about 10% of the stock's average daily volumes. Despite their sales miss, Jon Najarian likes the company on an operations level and thinks the Wisconsin-based company may have been one of the biggest victims of the February storms.
Take Your Position: Jobs Report
With the jobs report out Friday, what should the street be expecting to see from these numbers? "I don't think it's going to be a good jobs report," says Guy Adami, who sees no clear sign of recovery in the jobs market as companies have trimmed operations and learned to function with smaller staffs. "I think we're going to be around this 10% level for a long time," he says.
Productivity is up because wages were lower than expected, adds Zach Karabell, who interprets this as companies hiring to levels that are not comparable to wage expectations required to have an effect on retail. He urges caution when looking at jobs numbers over the next year.
Options Action in Steel
Jon Najarian points out interesting options activity surrounding AK Steel, which he says is "eerily similar" to the chart pattern seen in Millipore and SII , which implies that a possible takeover bid is on the horizon.
Call The Close
Jon Najarian: I'm buying and I like Rambus into the close.
Zach Karabell: I'm a buyer for strong names.
Patty Edwards: I don't like the market, but I like individual stocks, just like in retail. Pick the best operators, like Nordstrom’s.
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Trader disclosure: On March 4th, 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 (INTC), (BTU), (MSFT), (GS), (NUE), (C), (AGU); Seymour Owns (AAPL), (BAC), (EEM), (F), (CX); Finerman's Firm And Finerman Own (RIG); Finerman's Firm Owns (XBI); Najarian Owns (BAC) Call Spread; Najarian Owns (F) Calls; Najarian Owns (PCX); Najarian Owns (PFE); Najarian Owns (TEX) Calls; Najarian Owns (TIVO) Call Spread; Karabell Owns (MTW), (JPM); Edwards Owns (GLD) For Clients; Edwards Owns (SPY) For Clients; Edwards Owns (QQQQ) For Clients; Edwards Owns (GS) For Clients; Edwards Owns (JPM) For Clients; Edwards Owns (WMT) For Clients; Edwards Owns (BKE) For Clients; Jon Najarian Owns (BAC), Is Short (BAC) Calls; Jon Najarian Owns (C), Is Short (C) Calls; Jon Najarian Owns (GS), Is Short (GS) Calls; Jon Najarian Owns (JPM), Is Short (JPM) Calls; Jon Najarian Owns (MS), Is Short (MS) Calls; Jon Najarian Owns (TJX), Is Short (TJX) Calls; Jon Najarian Owns (WFC), Is Short (WFC) Calls; Jon Najarian Owns (WMT), Is Short (WMT) Calls; Jon Najarian Owns (AKS) Call Spreads; Jon Najarian Owns (AMSC) Call Spreads; Jon Najarian Owns (CMC) Call Spreads; Jon Najarian Owns (ESRX) Call Spreads; Jon Najarian Owns (FST) Call Spreads; Jon Najarian Owns (JOYG) Call Spreads; Jon Najarian Owns (QCOM) Call Spreads; Jon Najarian Owns (TSL) Call Spreads; Jon Najarian Owns (RMBS)
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