Halftime Pt 1: Will Slow And Steady Win The Race?
On Friday the traders sifted through the latest GDP numbers in an attempt to better understand what lies ahead for the economy and for stocks.
The headline number showed U.S. gross domestic product expanded at a 2.4% annual rate but down from the first quarter. In other words, the data showed growth in the second quarter, however at a slower pace.
Bullish investors say GDP confirms results from earnings season; slow and steady growth is sustainable despite headwinds.
"People continue to run around with the double-dip flag, but it's becoming recognized and more obvious as time passes that the economy continues to grow at a slow rate," says Charles Lieberman, chief investment officer of Advisors in a Reuters interview.
What’s the takeaway for traders?
Instant Insights with the Fast Money traders
I’m looking at the construction and inventory components of GDP, says Joe Terranova. That data was positive but the trend didn’t resonate with investors. I still expect to see G7 growth but it will likely be sluggish.
I had been shortgold but I took that trade off, he reveals. It’s probably too soon to bet on a big rotation out of safe havens and into higher risk trades. However I think it's ok to allocate a little risk to the market.
To confirm my thesis, I’ll be watching ISM on Monday, Terranova adds, a leading indicator in the market. The expectation is that it’s going to fall to 54.2 - but that's still above the 5-year average of 53.9. ISM would have to drop south of 50 before I could embrace the double dip argument.
GDP confirms my belief that we’re in a bifurcated market, adds Steve Cortes. Companies that have an international orientation seems to be doing well while those with a domestic orientation seem to do poorly.
To support my thesis, look at the charts of Masco and Caterpllar below. Both had traded largely in tandem until about two months ago – then they completely diverged. Masco generates a large amount of business from the US while Caterpillar generates business from all over the world.
Digging down in GDP, the data showed business spending on equipment and software was up sharply while consumer spending was soft, adds Patty Edwards. That says to me retailers are up against a consumer that’s struggling while businesses are trying to increase productivity through technology. I'd place bets accordingly and selectively.
HAS GOLDMAN FOUND A BOTTOM?
Goldman Sachs was the big winner for the week, rallying over 3%. The stock appears to have found its footing, up over 16% in July.
What’s the trade?
I think the trade is long Goldman, says Joe Terranova. Technically it looks like the stock has found its trough.
I like Goldman as well as the entire bank sector, says Steve Cortes. I also like Jefferies and Morgan Stanley and I’m long those names against the S&P.
POLL OF THE DAY
RIM was a big winner Friday due to reports that the Blackberry maker is set to unveil a long-awaited touch-screen handset designed to battle with Apple's popular iPhone at an event scheduled for August 3rd.
Called the Slider 9800, reports say the handset will be carried exclusively by AT&T and should go on sale in time for the holiday season and perhaps in time for back-to-school, the report said.
And that leads to our poll of the day. Tell us what you think.
BIG MARKET BUZZKILL: TECH
Friday’s market buzz kill: the tech sector. The semis weighed down the space with Nvidia , LSI and Western Digital all on the skids over the past year.
What’s going on?
Find out from FBR analyst Craig Berger. Watch the video above!
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Trader disclosure: On July 30, 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 (AMZN), (EMC), (CREE), (BRCM), (LRCX), (COP), (AXP), (BMO), (CSX), (PEP), (CVS), (GS), (PCP), (C), (APA), (FCX), (JOYG), (MMM), (MOS), (UAUA), (WYNN), (GOOG), (BBY), (SU), (KOL), (XBI), (BAX), (JNPR), (UAUA), (RIMM); Jon Najarian owns (NYX), (CBOE), (CME), (ARNA), (AAPL), (TXN); Cortes owns (NDAQ), (GS), (MS), (IAI), (RSX), (CIB), (FCX); Cortes is short Japanese Yen; Cortes owns Crude Oil; Cortes is short Gold; Cortes is short the S&P500; Cortes is short US Treasuries
For Patty Edwards
Edwards owns (AAPL) for clients
Edwards owns (INTC) for clients
Edwards owns (TXN) for clients
Edwards owns (GLD) for clients
Edwards owns (PGM) for clients
Edwards owns (AUY) for clients
For Craig Berger
FBR makes a market in (INTC), (BRCM), (NVDA), (LLTC), (LSI), (QCOM), (FCS), (SLAB), (MSCC), (ATHR)
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