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Halftime Pt 1: Attractive Stocks Amid Broad Headwinds

Stocks traded sideways on Monday as the Street approached the start of earnings season with a bit of caution.

Investors are worried that Corporate America’s outlook and guidance could take a hit – largely due to Europe’s financial woes and a weak economy domestically.

To make matters even more precarious, investors are jittery about Europe’s "stress tests" results to be released later this month as well as Chinese data over the weekend, which showed the country's copper demand dropped.

What should you be watching now?

Instant Insights from the Fast Money traders

I’m watching the latest data out of China, says Brian Kelly. As mentioned above copper and iron ore imports are down; in fact they've dropped for the 3rd straight month which I'd interpret to mean that China's economy may be slowing. Combined with what’s happening in Europe and the potential of the US consumer retrenching; we could be looking at a bigger contraction than what investors currently expect.

I'm less focussed on the market from a top down stand point, says Joe Terranova, Instead I'm looking at it from the bottom up for opportunities, especially with the slew of earnings reports that are due this week. They include:

Monday: Alcoa
Tuesday: Intel, Yum!
Wednesday: Texas Instruments
Thursday: JPMorgan, Google
Friday: Bank of America, Citi, GE

Personally, I’m not excited about Alcoa , Terranova reveals. Aluminum prices have been down this quarter. I am excited however about Intel results and I’m long Marvell Technology as a bet that a strong report from Intel bodes well for the entire space.

Back to China - I don’t agree that China is slowing, adds Zach Karabel of RiverTwice. China is slowing a rate of extremely accelerated growth. Whenever you hear chatter of China slowing it just means the rate of its incredibly fast growth is a little bit less.

If the China-story is still working, I’d play Caterpillar, Bucyrus, Joy Global or Teck Resources , counsels Pete Najarian. At a conference a few weeks ago, I heard that companies such as the one mentioned above have not seen a slowdown - they've seen continuous demand growth.

Also I'm watching the Vix . When it’s under 25. I’d start thinking about protecting the portfolio.

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TAKE YOUR POSITION: ALCOA

Alcoa and commodities declined Monday ahead of the company's earnings report due after the bell.

How should you play it?


A weak earnings report wouldn’t surprise anybody, says Brian Kelly. It’s a strong or upside surprise that could get the stock going.

I'm not bullish Alcoa but if you are, I’d be a buyer of Freeport upside calls, counsels Joe Terranova. If Alcoa surprises higher FCX calls should perform well.

I’ve been short Alcoa because I think they’re a high cost producer in a lower cost world, says Zach Karabell. Plus they have a really problematic cost structure even in the best of terms.

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BP HIGHER

BP traded to the upside Monday after published reports suggested the company is in talks to sell some of their assets.

According to The Sunday Times of London, BP is in talks to sell up to $12 billion in assets including its big stake in Alaska’s Prudhoe Bay, the largest oil field in North America.

The paper said Houston-based Apache approached BP with a plan a few weeks ago and negotiations were under way on the structure of an agreement.

What’s the trade?

Developments suggest the situation in the Gulf are getting better but instead of BP, I think the trade is long Anadarko, says Joe Terranova.

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TECH: NO SIGNAL?

The traders are closely watch tech stocks after Consumer Reports' said that they couldn’t recommend Apple's iPhone 4 based on its reception issues.

Elsewhere in tech, Janney upgraded Microsoft to a ‘Buy’ from ‘Neutral’ while maintaining a $30 price target.

What’s the tech trade?

The iPhone 4 reception issue may be an escalating problem, says Pete Najarian, but I expect Apple will address it immediately.

In tech, I’d look at Qualcomm, says Joe Terranova. It gives you exposure from



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Trader disclosure: On July 12, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Terranova owns (GOOG), (AMZN), (MON), (APC), (GMCR), (MYL), (MRVL), (BAC), (ADI), (ADBE), (AKAM), (HES), (CVS), (AXP), (EMC), (ABT); Kelly Is Short (GS); Kelly Owns (BP) Puts; Karabell Owns (GOOG), (AAPL), (BP), (C), (GS), (FXI), (FCX)

For Joe Terranova
Terranova works for (VRTS)
Terranova is chief market strategist of Virtus Investment Partners, LTD.
Virtus Investment Partners owns more than 1% of (CASS)
Virtus Investment Partners owns more than 1% of (LDR)
Virtus Investment Partners owns more than 1% of (LPHI)
Virtus Investment Partners owns more than 1% of (MGRC)
Virtus Investment Partners owns more than 1% of (XLB)
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 (XLK)
Virtus Investment Partners owns more than 1% of (XLU)
Virtus Investment Partners owns more than 1% of (SUBK)
Virtus Investment Partners owns more than 1% of (WDFC)
Virtus Investment Partners owns more than 1% of (YDNT)
Virtus Investment Partners owns more than 1% of (DRYS)

For Zack Karabell
River Twice Capital Owns (MSFT)
River Twice Capital Owns (CSX)
River Twice Capital Owns (GS)
River Twice Capital Is Short (AA)
River Twice Capital Is Short (SPY)
River Twice Capital Is Short (QQQQ)

For Brian Kelly
Accounts Managed By Kanundrum Capital Own (GME)
Accounts Managed By Kanundrum Capital Are Long U.S. Dollar
Accounts Managed By Kanundrum Capital Own (SDS)
Accounts Managed By Kanundrum Capital Are Short (BCS)
Accounts Managed By Kanundrum Capital Are Short (EWA)
Accounts Managed By Kanundrum Capital Are Short (EWI)
Accounts Managed By Kanundrum Capital Are Short (FCX)
Accounts Managed By Kanundrum Capital Are Short (FXI)
Accounts Managed By Kanundrum Capital Are Short (KMX)
Accounts Managed By Kanundrum Capital Are Short (NATI)
Accounts Managed By Kanundrum Capital Are Short (RSX)
Accounts Managed By Kanundrum Capital Are Short (USO)
Accounts Managed By Kanundrum Capital Are Short (WYNN)
Accounts Managed By Kanundrum Capital Are Short (XLF)
Accounts Managed By Kanundrum Capital Are Short (XLI)
Accounts Managed By Kanundrum Capital Are Short (XLE)
Accounts Managed By Kanundrum Capital Are Short (RCL)
Accounts Managed By Kanundrum Capital Are Short (CME)
Accounts Managed By Kanundrum Capital Are Short (HIG)
Accounts Managed By Kanundrum Capital Are Short (MET)
Accounts Managed By Kanundrum Capital Are Short (RKH)
Accounts Managed By Kanundrum Capital Are Short (CAT)
Accounts Managed By Kanundrum Capital Are Short (JOYG)
Accounts Managed By Kanundrum Capital Are Short (XLB)

For Kevin Sterling
BB&T Capital Markets Is A Market Maker In (FDX), (UPS)
BB&T Capital Markets Expects To Receive/Seek Investment Banking Compensation From (FDX), (UPS) In Next 3 Months
An Affiliate Of BB&T Capital Markets Received Non-Investment Banking Compensation From (UPS) In Past 12 Months

Late additions:
Karabell Owns (VALE)
River Twice Capital Owns (VALE)
Najarian Owns (TCK)
Najarian Owns (CSX) Calls, (LOW) Calls, (CNI)



CNBC.com with wires

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