Steve Cortes, founder of Veracruz, doesn't like the Treasury trade. Nevertheless, he admits it is "astounding" and persistent. He is fading it and said the best, most consistent way to do so is through crude.
Guy Adami, managing director of Drakon Capital, argued that crude inventories are "extraordinarily bearish." Based on the fundamentals, crude looks vulnerable, Adami said. When looking at the fundamentals of crude alone, Cortes agreed that it doesn't look good, but said most of that has already been priced in. Besides, demand and how the EMs are trading in Asia and Latin America show that other regions are outpacing the US. For that reason, he thinks crude is priced too low.
From the floor, Steve Grasso of Stuart Frankel said the mood is very negative. The poor microdata has been trumped by earnings data, but on Friday, there won't be news on either front. So he wonders what director the market will head: Higher or lower? Below the 1088 level in the S&P, he said investors should be negative. He thinks the next stop is the 1065 level. Note that we traded up to the 1130 level, but couldn't get past it, he said. Right now, he thinks investors should bottom fish because those who bought stocks above the 1100 level will likely add to their positions now.
FINANCIALS GET HAMMERED
Financials and commodities were clobbered in midday trading Thursday, as investors ratchet down their risk.
There are a lot of fears at play, said Guy Adami, managing director of Drakon Capital. He thinks the banks have downside risk. The only play that makes sense in the financial space is Bank of America , he said, but only for the long-term.
Steve Cortes, founder of Veracruz, is short BAC. If BAC breaks $13 a share, he said there's not much that will stop it from going down further.
Cortes is short BAC and banks overall because of housing. He said there is a "lingering housing exposure" that is important to consider. There is also a yield curve for banks, where they could take out 0% money and go out and buy tenures to get on the long-end of the curve at 3% or more. Now, that profit-making leg is no longer there for these financial institutions, he said.
Patty Edwards, principal at Storehouse Partners, said there is a lot of concern over the new financial regulatory reform laws. She is not interested in this sector.
Wheat rallied Thursday following a report indicating that drought-stricken Russia may boost grain imports.
Steve Cortes, founder of Veracruz, likes the agriculture trade. With cattle having hit a new high, he recommends buying Smithfield Foods .
Guy Adami, managing director of Drakon Capital, is concerned that rising wheat prices may hurt General Mills .
Steve Grasso of Stuart Frankel recommends taking profits in the ag space. Sell into strength, he said.
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