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Signs the Global Recovery is Happening

Thursday, 19 Aug 2010 | 7:58 PM ET

Stocks fell Thursday after two disappointing economic reports re-ignited fears of a double-dip recession.

The Labor Department said initial claims for unemployment benefits rose last week and the Federal Reserve of Philadelphia said manufacturing activity in the mid-Atlantic region has dropped since August. Stocks tumbled as a result of the news, as investors seems to ignore positive economic data from elsewhere in the world.

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The Shanghai Composite Index closed at a three-month high and the Bombay Stock Exchange's Sensitive Index, India's benchmark stock index, rose to a 30-month high, noted Peter Boockvar, an equity strategist at Miller Tabak.

"The US market response to the data is clearly very US specific now," said Boockvar. "There are some signs that the global recovery is happening, but much more in the US in fits and starts and much more clearly outside of the US."

Positive corporate news was not enough to overcome negative economic news, added Joe Terranova, chief market strategist at Vitrus Investment Partners. That hasn't been the case since last week, he said. He didn't like where the markets closed Thursday and recommends looking at shaving off some of your holdings.

If you are a believer of the economy and think it's bound to go higher, Guy Adami, managing director of Drakon Capital, recommends a look at Bank of America . Brian Kelly, founder of Kanundrum Capital, said he wouldn't touch the financial space. Kelly thinks the margins are going to be squeezed, so their profits and margins will go lower.

The Treasury market is the way to go, said Terranova. He recommends a long position in iShares Barclays 20+ Treasury Bond exchange-traded fund.

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SHARES OF DELL SLIDE IN AFTER-HOURS

Dell topped forecasts, but shares of the technology company fell in late trading on its second-quarter earnings report.

It's about the margins, said Guy Adami, managing director of Drakon Capital. Its earnings-per-share and revenue beat, but gross margins missed. For the past two year, the margins have gotten lower and lower each quarter, noted Brian Kelly of Kanundrum Capital.

"Margins will get you every time," said Joe Terranova, chief market strategist at Vitrus Investment Partners.

This was their shot at catching up with Hewlett-Packard , but Terranova said he doesn't think that's going to happen. Terranova thinks Dell's stock is under pressure, as the company seeks to transition into a service company. The transformation will take time, but he isn't sure what the catalyst is and wouldn't touch this stock.

Share of Dell are trading at a 52-week low, or 31% from the highs, said Tim Seymour of EmergingMoney.com.

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DID INTEL MAKE THE RIGHT MOVE IN ACQUIRING MCAFEE?

Shares of McAfee are too expensive for Guy Adami of Drakon Capital, who notes the stock hasn't been this expensive since 1999. He wonders why anyone would buy it now.

From a valuation standpoint, Intel is a "little bit rich," said Joe Terranova of Vitrus Investment Partners. From a strategic standpoint, however, you have to consider the margins. Intel has 67% gross margins and McAfee with 73%. There is an opportunity now to raise margins, he said.

"It's a great strategic move," said Terranova. "Security is where the industry needs to go right now."

Brian Kelly of Kanundrum Capital had liked Intel because of its dividend yield. He likes this deal with McAfee because it gets them out of the commodity business and differientiates their product, but said that nor the better dividend yield is enough to entice him now.


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Trader disclosures for Aug. 19, 2010:

Tim Seymour
Seymour owns (AAPL)
Seymour owns (BAC)
Seymour owns (F)
Seymour owns (INTC)
Seymour owns (MSFT)

Guy Adami
Adami owns (AGU)
Adami owns (BTU)
Adami owns (NUE)
Adami owns (C)
Adami owns (GS)
Adami owns (INTC)
Adami owns (MSFT)
Adami’s wife works at Merck

Brian Kelly
Accounts managed by Kanundrum Capital own (RIMM)
Accounts managed by Kanundrum Capital own (GLD)
Accounts managed by Kanundrum Capital own (GDXJ)
Accounts managed by Kanundrum Capital own (ANDE)
Accounts managed by Kanundrum Capital own U.S. Dollar
Accounts managed by Kanundrum Capital own Japanese Yen
Accounts managed by Kanundrum Capital own Swiss Franc
Accounts managed by Kanundrum Capital is short (AFL)
Accounts managed by Kanundrum Capital is short (IAI)
Accounts managed by Kanundrum Capital is short (RTH)
Accounts managed by Kanundrum Capital is short the U.K. Pound
Accounts managed by Kanundrum Capital is short (MCO)

Joe Terranova
Terranova owns (V)
Terranova owns (NRG)
Terranova owns (POT)
Terranova owns (OXY)
Terranova owns (GLD)
Terranova owns (BAX)
Terranova owns (PFE)
Terranova owns (SU)
Terranova owns (XBI)
Terranova owns (GOOG)
Terranova owns (LRCX)
Terranova owns (AXP)
Terranova owns (C)
Terranova owns (GS)
Terranova owns (BMO)
Terranova owns (MSFT)
Terranova owns (FCX)
Terranova owns (APA)
Terranova owns (TBT)

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)

Peter Boockvar
***No Disclosures***

Brent Thill
The U.S. equity strategist, a member of his team, or one of their household members has a long common stock position in Microsoft Corp.

The U.S. equity strategist, a member of his team, or one of their household members has a long common stock position in Oracle Corporation.

This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and investment banking services are being, or have been, provided.: Microsoft, Symantec

This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-investment banking securities-related services are being, or have been, provided.: Microsoft, Symantec

This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-securities services are being, or have been, provided.: Microsoft

Within the past 12 months, UBS Securities LLC has received compensation from this company/entity: Microsoft, Symantec

Dan Greenhaus
***No Disclosures***

Gene Munster
Piper Jaffray makes a market in (GOOG)

Brian Stutland
***No Disclosures***

Wire services contributed to this story

  Price   Change %Change
BAC
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4331
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HPQ
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INTC
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ISH BAR 20YTB
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