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Halftime: Brace For Afternoon Sell-Off?

Thursday, 6 May 2010 | 1:16 PM ET

Top traders are bracing for an afternoon sell-off as fears about the mounting crisis overseas dragged down stocks.

Headwinds were largely triggered by the ECB, which left interest rates unchanged but stopped short of taking any additional measures to contain what many investors think is a rapidly growing financial crisis.

The market is being driven by a string of worries, explains Fast Money host Melissa Lee.
- European banks have about $2.1 trillion in exposure to *PIIGS debt;
- Euro weakness will likely have a strong impact on profits at some US companies;
-the EU is the number 1 trading partner for China.
(*PIIGS stands for Portugal, Ireland, Italy, Greece & Spain)

In addition, the negative tone was amplified by weaker-than-expected same-store sales results for April, sparking concerns about the health of consumer spending.

How should you be positioned now?

Instant Insights with the Fast Money traders

I’m watching 1151 in the S&P, says Steve Grasso of Stuart Frankel. We’ve defended it twice but I don’t expect we’ll bounce a third time. There are just too many magnets to drag us down. We lost financials and energy and without them, I think the market goes to 1120.

Options investors are paying up for protection, adds JJ Kinahan of TD Ameritrade. There is just that much concern right now. Personally, I don’t see any upside catalyst. I also think stocks trade lower through Thursday's close.

I agree that the S&P wants to break below 1151, says Fast Money trader Guy Adami. I’ve been bearish for a long time but today I think we might bounce.

Fast Money Halftime Report
The Fast Money traders offer midday advice on the markets, with CNBC's Melissa Lee.

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RETAIL TRADE: MODEST APRIL SALES

As we mentioned above, retailers came under pressure Thursday after the latest round of same store sales disappointed investors and put a damper on Wall Street's hopes for a consumer rebound.

What’s the trade?

A couple days ago Mastercard reported a fantastic quarter, explains Guy Adami. I can’t help but wonder if that stock is ahead of itself considering these developments. I’d think about taking profits.

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TOPPING THE TAPE: AUTO SUPPLY NAMES

Auto supply names outpaced the markets on Thursday after Deutsche bank upgraded Borg Warner, TRW, Cooper Tire and Johnson Controls to a Buy.

In a note Deutsche analysts said, “All four companies dramatically exceeded our expectations which has led us to re-assess, and upgrade our estimates for their prospective earnings power.”

What’s the trade?

Of all the names TRW is the one I’d watch closest, says Pete Najarian. They’ve exhausted their inventories and on a valuation basis the stock looks cheap.

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TAKE YOUR POSITION: LAS VEGAS SANDS

With shares up 42% over the past 3 months how should you game Las Vegas Sands into earnings, due after the bell?

I’m seeing a large volume of sellers in the May 23 calls, says JJ Kinahan. Options traders are selling into earnings.

I think the earnings will be fine but I’d wait until after earnings before establishing any kind of position, says Guy Adami.

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UNUSUAL ACTIVITY: COP

JJ Kinahan has spotted unusual options action in ConocoPhilips .

He’s seeing a big seller of January 2011 60 calls against a long position in COP stock.

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TRADE TO GO: BAND OF AMERICA

Guy Adami suggests putting BofA on the radar.

The stock is trading below $17 for the first time in a while, If the S&P 500 can hold above 1151 I’d be a buyer, he says.

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CALL THE CLOSE

Guy Adami: I’m bearish but I think we might bounce today.
Steve Grasso: I think we go lower.
JJ Kinahan: There doesn’t seem to be an upside catalyst. I think we go down from here.


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Trader disclosure: On May 6, 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 (GS), (INTC), (BTU), (NUE), (MSFT), (AGU), (C); Najarian Owns (C) Calls; Najarian Owns (CAT); Najarian Owns (CLF) Call Spread; Najarian Owns (HPQ), Is Short (HPQ) Calls; Najarian Owns (MS), Is Short (MS) Calls; Najarian Owns (PG) Calls; Najarian Owns (XOM) Call Spread; Grasso Owns (SDS), (NDAQ), (DYN), (LPX), (ASTM), (ABK), (BAC), (BGP), (C), (JPM), (NEM), (PRST), (PFE), (BA), (T), (CSCO); Finerman's Firm Is Short (IYR), (IWM), (MDY), (SPY); Finerman's Firm Is Long S&P Puts; Finerman Owns (AAPL); Finerman's Firm Owns (BAC), (BAC) Leaps; Finerman Owns (BAC) Preferred, (BAC), (BAC) Calls; Finerman Owns (GS) Calls; Finerman's Firm Owns (IBM); Finerman's Firm And Finerman Own (JPM); Finerman's Firm Owns (KFT); Finerman's Firm Owns (MCD); Finerman's Firm And Finerman Own (RIG), (RIG) Calls; Finerman's Firm Owns (TJX), (TGT), (WMT); Kinahan Is Short (SPY); Kinahan Is Short (XLF); Kinahan Is Long (KFT) Through Options; Terranova Is Long Gold; Terranova Owns (SWN), (PFE), (XCO); Stutland Is Long (XLF) Strangle, Is Short (XLF) Calls

For JoeTerranova
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (DRYS)

For Steve Grasso
Stuart Frankel And Its Partners Own (AMR)
Stuart Frankel And Its Partners Own (BAX)
Stuart Frankel And Its Partners Own (DYN)
Stuart Frankel And Its Partners Own (CUBA)
Stuart Frankel And Its Partners Own (GERN)
Stuart Frankel And Its Partners Own (HSPO)
Stuart Frankel And Its Partners Own (MERC)
Stuart Frankel And Its Partners Own (NWS.A)
Stuart Frankel And Its Partners Own (NYX)
Stuart Frankel And Its Partners Own (PDE)
Stuart Frankel And Its Partners Own (PFE)
Stuart Frankel And Its Partners Own (PRST)
Stuart Frankel And Its Partners Own (RDC)
Stuart Frankel And Its Partners Own (TLM)
Stuart Frankel And Its Partners Own (TRV)
Stuart Frankel And Its Partners Own (XRX)
Stuart Frankel And Its Partners Own (SDS)
Stuart Frankel And Its Partners Are Short (QQQQ)
Stuart Frankel And Its Partners Are Short (CL)
Stuart Frankel And Its Partners Are Short (AAPL)

For Brian Kelly
Kanundrum Capital Is Long U.S. Dollar
Kanundrum Capital Owns (TLT)
Kanundrum Capital Owns (GLD)
Kanundrum Capital Owns (GFI)
Kanundrum Capital Owns (AUY)
Kanundrum Capital Owns (LPS)
Kanundrum Capital Owns (CCI)
Kanundrum Capital Is Short (DE)
Kanundrum Capital Is Short (NUE)
Kanundrum Capital Is Short (XOM)
Kanundrum Capital Is Short (SU)
Kanundrum Capital Is Short (HES)
Kanundrum Capital Is Short (AA)
Kanundrum Capital Is Short (CLF)
Kanundrum Capital Is Short (IBM)
Kanundrum Capital Is Short (BCS)
Kanundrum Capital Is Short (DB)
Kanundrum Capital Is Short (MCO)

For Anthony Scaramucci
Scaramucci Owns (C), Skybridge Owns (C)


CNBC.com with wires

  Price   Change %Change
S&P 500
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BAC
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BWA
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COP
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CTB
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JCI
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LVS
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MA
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TRW
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SPDR NRG SEL
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SPDR FIN SEL
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SPDR SPRET
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MCD
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