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Halftime Pt.1: Horrible Housing, Sell Signal, Or Hold Your Breath & Buy?

Stocks traded lower on Wednesday after the latest economic data again triggered fears about the fragile state of the economy.

Although we've seen bad reports, this time the data was absolutely terrible.

Specifically, the Commerce Department saidnew home sales plunged 33%, to their lowest level since 1963. In addition, April and March sales figures were revised lower.

Is such extreme weakness a sell signal or is this the kind of headline where you should hold your breath and buy?

Instant Insights with the Fast Money traders

I don’t understand why investors are shocked by the housing data, says Steve Grasso. With the first time home credit expiring, it shouldn’t surprise anyone.

But copper, oil and lumber are all down and they’re leading market indicators. We have a GDP number coming up and housing is about 40% of it. You can’t get great GDP growth with a terrible housing market. I'd be a seller of any rally.

Copper got near $3 and stalled; the SPY got near its 200-day and stalled, and the financials also stalled, adds Pete Najarian. That’s telling. It suggests the market is challenged.

However if you're playing homebuilders from the short side it may be time to think about covering, says widely followed investor Whitney Tilson. (He made huge profits betting against the housing market.)

Some of the major homebuilder are now trading at just a slight premium to book value, Tilson explains, and generally I’m only interested in shorting a sector with terrible fundamentals, when they’re trading at 1.5 times book or higher.

With the decline over the last month, major homebuilders are now trading around 1.1 times book and it’s time to start covering, Tilson says. I haven’t pulled the trigger yet because I think there’s another shoe to drop but I plan to start trimming my shorts.

(Click here for our entire interview with Whitney Tilson)

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FED TO MOVE MARKET?

Looking ahead to afternoon action, the traders as well as the rest of Wall Street will be poring over the Fed statement due out at 2:15pm.

Consensus is that the central bank will extend their pledge to hold overnight interest rates ultra low for "an extended period" to aid the still fragile economic recovery.

What must you know?

Since 2008 on days of Fed rate decisions, the S&P 500 has risen 79 percent of the time for an average gain of 1.2 percent, according to Birinyi Associates Inc.

*Steve Grasso, Brian Kelly and Jared Levy are all sellers of any rally.

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BP: ‘RECKLESS’?

In the latest developments from the Gulf, U.S. Interior Secretary Ken Salazar said on Wednesday he believes initial findings from investigations of the Deepwater Horizon rig explosion indicate reckless behavior preceded the accident.

My own view having taken a review of some of the preliminary investigations that have been done is that there was reckless conduct that was involved," Salazar told lawmakers at a Senate Appropriations subcommittee hearing.

What should you make of it?

There’s way too much risk in BP and Anadarko, adds Jared Levy. Unless you’re a professional investors I’d stay away.

I’d also stay away from BP as well as Anadarko, counsels Brian Kelly.

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TICK BY TICK: RIMM

The traders are closely watching the action in RIM , which reports earnings on Thursday. The stock fell at the open, approached its Monday lows and then popped into positive territory.

What should you make of it?

I’m seeing a lot of call buying, says Pete Najarian – it could suggest a modest bullish bias. If you share that outlook, look at a call spread or go one month against another – sell the July to buy the August.

If you’re long RIM stock going into earnings you might want to consider a collar, adds Jared Levy. Maybe buy downside July 55 put and sell the upside 66.5 call.

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UNDER THE RADAR: ANSYS

The traders are looking at a tech play that begins with the letter ‘A’ and no it’s not Apple.

Ansys is the number one market share provider of engineering simulation software.

The company's software is used to design everything from wind turbines to heart valves to the Chevy volt, and even smartphones.

With shares are up over 40% in the last year can Ansys stay on top?

Find out from the company's President and CEO James Cashman. Watch the video now!


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Trader disclosure: On June 23, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Kelly owns (BP) puts; Kelly owns (FCX) puts; Kelly owns (GLD); Kelly owns (GDXJ); Kelly is short (GS); Grasso owns (ASTM), (ABK), (BAC), (BGP), (C), (DYN), (JPM), (LPX), (NDAQ), (PRST)

For Brian Kelly
Accounts managed by Kanundrum Capital own (AUY)
Accounts managed by Kanundrum Capital own (GFI)
Accounts managed by Kanundrum Capital is short (AMZN)
Accounts managed by Kanundrum Capital is short (RCL)
Accounts managed by Kanundrum Capital is short (XLY)
Accounts managed by Kanundrum Capital is short (AFL)
Accounts managed by Kanundrum Capital is short (CME)
Accounts managed by Kanundrum Capital is short (EWI)
Accounts managed by Kanundrum Capital is short (EWO)
Accounts managed by Kanundrum Capital is short (GS)
Accounts managed by Kanundrum Capital is short (HIG)
Accounts managed by Kanundrum Capital is short (XLF)
Accounts managed by Kanundrum Capital is short (XLI)
Accounts managed by Kanundrum Capital is short (FCX)
Accounts managed by Kanundrum Capital is short (XLB)
Accounts managed by Kanundrum Capital is short (XLK)
Accounts managed by Kanundrum Capital is short (CLF)
Accounts managed by Kanundrum Capital is short (JOYG)

For Steve Grasso
Stuart Frankel & Co and it’s partners own (BAX)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (DHR)
Stuart Frankel & Co and it’s partners own (DYN)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (MERC)
Stuart Frankel & Co and it’s partners own (NWS.A)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PDE)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own (RDC)
Stuart Frankel & Co and it’s partners own (SYMC)
Stuart Frankel & Co and it’s partners own (TLM)
Stuart Frankel & Co and it’s partners own (TRV)
Stuart Frankel & Co and it’s partners own (XRX)
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners own (TBT)
Stuart Frankel & Co and it’s partners are short (QQQQ)
Stuart Frankel & Co and it’s partners are short (AAPL)


For Whitney Tilson

Funds managed by Whitney Tilson own (BP)



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