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Markets On Edge Before Jobs Report

One day ahead of the jobs reports, both the Dow and S&P traded lower on concerns that a weak consumer could derail the rally.

Although earlier in the week ADP showed private employers added more jobs than expected in July those results were tempered by government data which showed initial claims for jobless benefits rose to 479,000 last week, defying analysts' expectations for a dip from the previous week.

"Claims have been maddeningly stubborn to come down, and that could make for a rough Friday," says Bruce Zaro, chief technical strategist at Boston's Delta Global Advisors.

Economists polled by Reuters are expecting Friday's U.S. Labor Department report to show a drop of 65,000 in non-farm payrolls in July as temporary U.S. Census Bureau jobs dried up. Private employers are expected to have added 90,000 jobs.

What should you be looking for?

Instant Insights with the Fast Money traders

The Street is expecting a negative headline so I think the surprise is to the upside, speculates Tim Seymour.

I agree, says Joe Terranova. And the tell for me will be if money rotates out of Treasuries and into equities.

I expect to see near-term weakness in the market, counters Anthony Scaramucci. An economy that can’t create jobs will suggest to investors we’re going into the back half of the year with lackluster growth.

Forget the headline number, the number that matters most is the private sector number, says Deutsche economist Joe LaVornga. We’ll need to see something above consensus for the market to gain traction.

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AFTER HOURS ACTION: KRAFT

Shares of Kraft popped in extended trade after the food giant posted earnings that beat analyst forecasts Thursday.

The world's second largest food company said it earned 60 cents a share, excluding one-time items, above analysts estimates of 52 cents a share and down from 56 cents a share a year earlier.

Sales however were weaker than expected. Kraft said sales reached $12.25 billion, below expectations of $12.33 billion but up from $10.16 billion a year ago.

What’s the trade?

I thought there was a lot to like in their report, says Karen Finerman. I’m long Kraft.

This is another example of a boring stock that hedge funds own because it’s going up, adds Anthony Scaramucci.

> For in-depth coverage of Kraft earnings click here

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AFTER HOURS ACTION: ACTIVISION-BLIZZARD

Shares of Activision plunged as much as 6% in extended trade after the video game maker reported sales that came in well below Wall Street targets.

Thomas Tippl, Activision's chief operating and financial officer, said non-GAAP revenue fell short of expectations due to the impact of foreign exchange, and because new titles in the quarter, which included "Blur" and "Singularity," underperformed.

"The retail market continues to be difficult ... but what we're seeing on the other hand is strength in our core franchises on digital revenue generation," Tippl said in an interview.

Also he said for the first time ever, digital sales—which include revenue from the blockbuster online game "World of Warcraft" as well as downloadable content for "Call of Duty"—outpaced retail sales

> For in-depth coverage of Activision earnings click here


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START HOARDING WHEAT THINS?

On Tuesday investors were attempting to gauge the future of food prices, after Russia said it would temporarily halt grain exports.

Russia's worst drought on record has devastated crops in parts of the country and sent international grain prices soaring as markets have speculated on restricted supply from one of the world's leading exporters.

Prime Minister Vladimir Putin told a government meeting on Thursday that a temporary ban on grain exports was needed, with a spokesman later saying this would come into force from August 15 and would apply to contracts that had been already signed.

On the news wheat markets immediately jumped to nearly two year highs.

What should you make of it?

I think this is a pretty big story, says Brian Kelly on the Halftime Report. Investors need to think about what the ramifications will be. As you establish new trades think about whether companies are going to be able to obtain wheat supplies and what their contingency plans may be. One way to play it is longAnderson , he adds on Fast at 5. They own wheat.

Archer Daniels, Bunge , Agrium and Potash may all be ways to play this story, says Steve Grasso, but I can’t help but wonder if it’s more a one-day wonder than anything else.

For what it's worth, my clients are shorting food and beverage regardless of this development.

Investors have doubted the Russia story largely because the US crop is so substantial, explains Steve Cortes. It’s going to be record. But what I think they don’t see is that this is just a part of a massive emerging markets demand for resources, he says. I think we start to see a grab for resources broadly.

I’ve done some research on these developments, says host Melissa Lee, and Robert Moskow of Credit Suisse says "In past years, this is where ADM and Bunge have stepped in to fill the void for livestock producers in the eastern hemisphere and make outsized profits."

I’d ask myself who’s already hedged, says Patty Edwards. I believe Dominos is hedged through the end of the year. That may bode well.

That's another point to consider, food producers have said they can’t pass along the costs to the consumer, adds Brian Kelly. They can’t pass it on or they lose their competitive edge.

I'd watch Sara Lee, Cambells and similar names, says Joe Terranova. If you're in those names you need to find out if they're hedged.

If you want to play the space, my clients are bullish on Caterpillar and Deere ; the companies that supply equipment to farmers, adds Grasso.

Want to hear more about this developing situation? Check out the insights from Jim Bower of Bower Trading.

Watch the video now!




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Trader disclosure: On Aug 5, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders: Seymour owns (AAPL), (BAC), (BX), (GOOG), (INTC), (MOS), (POT); Terranova owns (AKAM), (APA), (BAX), (C), (COP), (EMC), (FCX), (GOOG), (GS), (JNPR), (MOS), (MSFT), (PFE), (POT), (SKX), (SU), (TER), (XBI); Finerman owns (AAPL); Finerman's firm owns (ARM); Finerman’s firm owns (BBY); Finerman's firm owns (LEA); Finerman’s firm owns (KFT); Finerman & Finerman's firm owns (RIMM); Finerman’s firm owns (TSX); Finerman’s firm owns (GYMB); Finerman’s firm owns (PLCE); Finerman's firm owns (WMT); Finerman's firm owns (DAN); Finerman's firm is short (IJR); Finerman's firm is short (MDY); Finerman's firm is short (SPY); Finerman's firm is short (IWM); Finerman’s firm owns S&P 500 puts; Finerman’s firm owns Russell 2000 puts

For Anthony Scaramucci
Scaramucci and SkyBridge Capital own (AAPL)
Scaramucci and SkyBridge Capital own (KO)

For Joe Terranova
Terranova is chief market strategist of Virtus Investment Partners, LTD.
Virtus Investment Partners own more than 1% of (ABAX)
Virtus Investment Partners own more than 1% of (ALK)
Virtus Investment Partners own more than 1% of (AMKR)
Virtus Investment Partners own more than 1% of (CASS)
Virtus Investment Partners own more than 1% of (CSVI)
Virtus Investment Partners own more than 1% of (XLY)
Virtus Investment Partners own more than 1% of (XLP)
Virtus Investment Partners own more than 1% of (DRYS)
Virtus Investment Partners own more than 1% of (EXR)
Virtus Investment Partners own more than 1% of (XLI)
Virtus Investment Partners own more than 1% of (IGE)
Virtus Investment Partners own more than 1% of (LDR)
Virtus Investment Partners own more than 1% of (LPHI)
Virtus Investment Partners own more than 1% of (XLB)
Virtus Investment Partners own more than 1% of (MGRC)
Virtus Investment Partners own more than 1% of (NRCI)
Virtus Investment Partners own more than 1% of (DBV)
Virtus Investment Partners own more than 1% of (SUBK)
Virtus Investment Partners own more than 1% of (XLK)
Virtus Investment Partners own more than 1% of (XLU)
Virtus Investment Partners own more than 1% of (WDFC)
Virtus Investment Partners own more than 1% of (YDNT)

For Brian Kelly
Accounts managed by Kanundrum Capital own (RIMM)
Accounts managed by Kanundrum Capital own (INTC)
Accounts managed by Kanundrum Capital own (XBI)
Accounts managed by Kanundrum Capital own (GLD)
Accounts managed by Kanundrum Capital own (GDXJ)
Accounts managed by Kanundrum Capital own (JPM)
Accounts managed by Kanundrum Capital own (CM)
Accounts managed by Kanundrum Capital own (BMO)
Accounts managed by Kanundrum Capital own (ANDE)

For Dan Binder
Within the past twelve months, Jefferies and/or its affiliates received non-investment banking, securities related compensation for client services it provided to BJ's Wholesale Club, Inc.
Jefferies makes a market in Costco Wholesale Corp.
Jefferies makes a market in Dollar Tree Inc.
Jefferies makes a market in Staples, Inc.

For Brian Stutland
Stutland owns (KO) debt

For Joe LaVorgna
***No Disclosures***

For Jim Bower
***No Disclosures***

For Doug Kass
***No Disclosures***

For James Pethokoukis
***No Disclosures***


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