A sudden spike in commodity prices could hurt consumer stocks, said two "Fast Money" traders Tuesday.
Shares of ConAgra Foods , for example, sold off after the company reported weaker-than-expected profits and cut its full-year earnings outlook. Also, JPMorgan on Tuesday downgraded Sanderson Farms, as a bushel of corn is now above $5.
With high corn costs, Karen Finerman of Metropolitan Capital Advisors is concerned about the entire space. Finerman thinks we could see margin compression across the board because companies are unable to pass the costs onto the consumer, who is also struggling.
Patty Edwards of Trutina Financial agrees that there could be some margin compression in the food industry, but said it won't stop there. With cotton prices up almost 40 percent year-over-year, the cost of clothing has also climbed. Like the food names, she said retailers are unable to cover the increase by raising prices.
While Finerman is worried about the food industry, she does like Kraft because of its Cadbury deal. She thinks the deal will fuel the company for a little while longer.
ANALYZE THIS: FED DECISION TUESDAY
The Federal Reserve on Tuesday resumed a debate on whether to pump billions of dollars more into the sluggish economy, but was likely to hold off to take further readings on the health of the recovery.
With the unemployment rate at a lofty 9.6 percent and inflation running below levels the Fed would like, some officials may argue at a one-day policy meeting on Tuesday that the case for more easing is already made. Others have made clear they would view a move as premature.
In the absence of action, financial markets will scour the Fed's post-meeting statement for any clues on how the internal debate is unfolding, and whether the central bank may be moving closer to relaunching large-scale purchases of government bonds.
The Fed began its meeting as scheduled at around 8 a.m. EDT, a Fed spokesman said. Policymakers are expected to release a statement outlining their thinking at around 2:15 p.m. EDT.