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Halftime Report: Is Fed About To Hike Discount Rate, Again?

Published: Thursday, 18 Mar 2010 | 1:15 PM ET

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By: Lee Brodie
Producer

Halftime Report

The market melt-up appeared to be losing steam on Thursday due to chatter the Fed may hike the discount rate again, after the bell.

What's the word on the Street?

If you believe in history repeating itself, you may want to take pause, says Guy Adami. The last time the Fed raised the discount rate was February 18^th, a Thursday, after the close. And the next day was options expiration, which is what we’re looking at today. I think there’s a reasonable chance they do it. I’d get flat. Looking at the broad market, I can’t help but wonder if the market wants to reverse and go down and this becomes the catalyst.

(.SPX)

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The longer the rumor is out about a hike in the discount rate, the less traders believe it, adds Steve Grasso. But that’s not the only factor dragging down stocks right now. There are also worries about Greece. New reports suggest they may need to go the IMF. It seems investors are selling the market and sitting on their hands waiting to hear what’s fact and what’s fiction. But, as long as the S&P [.SPX Loading... () ] stays above 1150 I’m a buyer.

I’m seeing aggressive buying of at-the-money puts in April SPDRs, adds JJ Kinahan of TD Ameritrade. That says to me investors are cautious and are starting to worry about all the variables that could be unsettling for the market.

Don’t forget the market has been up for 8 days, says Jeff Tomasulo of SMB. The move lower may just be investors taking risk off the table. Personally, I’m taking profits in leaders such as Goldman [GS Loading... () ], Nike [NKE Loading... () ], and Amazon [AMZN Loading... () ]. I’m not out of the market, but I took risk off. I’m a seller of the market short-term and I’ll be a buyer on the next pullback.

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TAKE YOUR POSITION: PALM

Shares of Palm [PALM Loading... () ] rallied on Thursday ahead of the company’s earnings release after the bell. The gains were modest however, compared to the recent action in this stock; which hit a 52-week low earlier in the week.

What must you know?

I’m seeing heavy buyers of the March 5 and March 6 calls, says JJ Kinahan. I think investors are betting that earnings just can’t get much worse.

But if you’re going to play this stock, you should know there’s chatter on the Street that Palm is nothing but a take under candidate at about $1, adds Guy Adami.

Play Fast Money Madness

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TOPPING THE TAPE: BURGER KING

Shares of Burger King [BKC Loading... () ] rallied on Thursday after Deutsche upgraded the stock to ‘Buy’ from ‘Hold’ and increased the price target to $24 from $19 citing relative underperformance.

What’s the trade?

Portfolio managers are rotating into laggards, explains Steve Grasso. I’m seeing nimble money spinning out of McDonald’s [MCD Loading... () ] and into this name. But the vanilla money is still in McDonald’s so it wouldn’t surprise me to see the trend reverse in a few days.

If you’re looking to trade the space, I’d look at Jack-In-The-Box [JACK Loading... () ], counsels Guy Adami.

I’m seeing investors rotate out of this space and into financials [XLF Loading... () ], adds JJ Kinahan.

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TRADE UPDATE: VIMPLE COM

With shares down about 5% after disappointing earnings, the Ambassador is keeping a close eye on Vimple Com [VIP Loading... () ].

What’s the play?

I’m bullish on this name on the pullback, says Tim Seymour. I think VIP is one of the best companies in emerging markets.

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CALL THE CLOSE

Guy Adami: I’d get flat.

Jeff Tomasulo: I’m a seller of the market short-term.

JJ Kinahan: I think the S&P trades 1170 within the next two days.

Steve Grasso: As long as the S&P stays above 1150 I’m a buyer.

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Trader disclosure: On March 18th, 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), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Stutland Equities Is A Market Maker in (VIX); Stutland Equities Is A Market Maker in (SPX) Futures; Stutland Owns (GS) Call Spread; Stutland Owns (GE); Kelly Is Short (EURUSD); Kelly Is Short (GBPUSD); Kelly Is Short (EZU); Finerman's Firm Is Short (SPY), (IWM), (MDY), (IJR), (SPY), (USO); Finerman's Firm Owns (IYR) Puts; Finerman's Firm Is Long S&P Puts; Finerman Owns (AAPL); Finerman's Firm Owns (BAC), (BAC) Leaps; Finerman Owns (BAC), (BAC) Preferred; Finerman's Firm And Finerman Own (GOOG); Finerman's Firm And Finerman Own (JPM); Finerman's Firm And Finerman Own (WFC) Preferre ; Grasso Owns (TSO); Grasso Owns (AAPL)

For Steve Grasso
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