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Halftime: Corporate America About To Take Down Numbers?

Tuesday, 1 Jun 2010 | 1:19 PM ET

Investors spent the first day of June grappling with another volatile session as stocks rallied off their lows but struggled to hold onto gains.

The action was particularly troublesome considering new data showed U.S. construction spending made its largest monthly increase in nearly 10 years and U.S. manufacturing expanded for a tenth straight month.

What must you know to trade this market?

Instant Insights with the Fast Money traders

We’re about to embark on preannouncement season, explains veteran trader and CNBC contributor Gary Kaminksy. Right now the indecision in the market stems from worry about whether Europe’s woes impacted corporate performance domestically. Personally, I can’t help but wonder if corporate CFOs use Europe as an opportunity to take down numbers if only to pad themselves against the unknown.

I’m concerned about companies that generate a large percentage of revenue from Europe, adds Patty Edwards of Storehouse. Guess already took numbers down because of Europe and I think more of the same is to come. I’d keep an eye on companies that generate more than 30% of their revenue from Europe, That includes McDonald’s as well as Ford, Electronics Arts, Itron and Activision, she says.

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I would expect to see pressure on financial institutions exposed to Europe, muses Zach Karabell of RiverTwice. But unless we see a spike in unemployment in Europe, I wouldn’t expect to see a pronounced impact on economic activity at least in this quarter.

Also, fundamentals will probably come into play in a big way, adds Mike Gurka of Neural, because Europe as well as the volcano wasn’t priced in. Looking at the American market, I do think there's a little upside left in the S&P however my target is 1104.

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TOPPING THE TAPE: APPLE

Apple topped the tape on Tuesday with the stock sharply higher after the tech titan said it sold over 2-million iPads during the gadget's first two months on the market, ahead of most analyst expectations.

On the news, UBS upped its price target to $320, explains host Melissa Lee.

What’s the trade?

I think the stock still has room to run, muses Patty Edwards. People are spending on technology even if they don’t have jobs.

It seems to me portfolio manger have to own Apple because of the relative underperformance of other stocks in the sector, adds Gary Kaminksy. That alone should send shares higher.

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INVESTORS CONTINUE TO CRUSH BP

Investors continued to punish BP on Tuesday after efforts to contain the spill in the gulf failed over the weekend.

Raymond James analyst Pavel Molchanov says that costs associated with the spill have now spiraled dramatically higher from earlier estimates.

He now thinks cash outlays for BP could be as high as $5.2 billion in 2010, compared to its earlier estimate of $1.6 billion, and $2.3 billion in 2011.

Although costs are climbing it probably won't come at the expense of the dividend.

Molchonov tells the Fast Money in a live interview that he thinks there’s less than a 20% chance that management cuts the dividends over the next 6 months.

However, it's important to note that the stock has now lost a total of 70-billion in market cap since April 21st.

What’s the trade?

My instinct is to hold the stock because I think its oversold, says Patty Edwards. However, since I manage money for other people I sold out of my position because I feel compelled to take a more conservative approach.

* Find out what else Raymond James analyst Pavel Molchanov tells Fast Money. Watch the video now!

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CALL THE CLOSE:

Gary Kaminsky Don’t buy stocks only because of dividend yields. It’s a very dangerous strategy.

Patty Edwards : I’d play individual names.

Zach Karabell: I don’t expect the market to find direction this week.

Mike Gurka: I think the market has a little upside left; my S&P target is 1104.


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Trader disclosure: On June 1, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Edwards owns (PM); Karabell owns (SLB), (GE), (AAPL), (GOOG), (BRCM), (IBM), (C), (GS)

For Patty Edwards
Edwards owns (PM) for clients
Edwards owns (BP) for clients
Edwards owns (RIG) for clients
Edwards owns (NE) for clients
Edwards owns (DO) for clients
Edwards owns (HAL) for clients
Edwards owns (SLB) for clients
Edwards owns (OXY) for clients
Edwards owns (CVX) for clients
Edwards owns (XOM) for clients
Edwards owns (COP) for clients
Edwards owns (TOT) for clients
Edwards owns (SWN) for clients
Edwards owns (GE) for clients
Edwards owns (MCK) for clients
Edwards owns (HBC) for clients
Edwards owns (AMZN) for clients
Edwards owns (AAPL) for clients
Edwards owns (YHOO) for clients
Edwards owns (GOOG) for clients
Edwards owns (HPQ) for clients
Edwards owns (ADBE) for clients
Edwards owns (INTC) for clients
Edwards owns (TXN) for clients
Edwards owns (NVDA) for clients
Edwards owns (CSCO) for clients
Edwards owns (ORCL) for clients
Edwards owns (IBM) for clients
Edwards owns (MS) for clients
Edwards owns (JPM) for clients
Edwards owns (CS) for clients
Edwards owns (BAC) for clients
Edwards owns (C) for clients
Edwards owns (S&P 500) for clients
Edwards owns (QQQQ) for clients
Edwards owns (GLD) for clients
Edwards owns (VXX) for clients
Edwards owns (SLV) for clients

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AAPL
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