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Halftime: Trading Higher Commodity Prices

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.

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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.

Ahead of the statement, CNBC's Melissa Lee got insight on what the Fed might say from Joe Lavorgna, an economist at Deutsche Bank. He thinks there could be a disappointment trade in Treasurys because in his mind, the economy is in a similar spot as it was when the Fed last met in August. Watch the video for his full analysis—it starts at 2:10.

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CALL TO THE FLOOR: BRITISH AIRWAYS

Airlines stocks made a big move in trading Tuesday with the DJ Airlines

exchange-traded fund pushing higher.

British Airways has seen considerable gains. Shares are up 38 percent year-to-date. To talk about that success, CEO Simon Talling-Smith stopped by the "Fast Money" studios.

Watch the video to see how it went.

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CALL THE CLOSE

Patty Edwards, chief investment officer of Trutina Financial, thinks the market could push higher.

Veracruz founder Steve Cortes and Brian Kelly, founder of Kanundrum Capital, recommend selling the financials via the Financial Select Sector SPDR exchange-traded fund.

"If the market goes higher, I would probably sell into it," said Karen Finerman, president of Metropolitan Capital Advisors.

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Trader disclosure: On September 21, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Finerman owns (GOOG); Finerman’s firm owns (BAC); Finerman’s firm owns (JPM); 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; Cortes is short (XLF); Cortes is long the S&P 500; Cortes is short Crude Oil; Cortes is long U.S. Treasuries; Cortes is short (RSX); Cortes is short the British Pound

For Patty Edwards
Edwards owns (AAPL) for clients
Edwards owns (AMZN) for clients
Edwards owns (CSCO) for clients
Edwards owns (EMC) for clients
Edwards owns (FCX) for clients
Edwards owns (GOOG) for clients
Edwards owns (HPQ) for clients
Edwards owns (IBM) for clients
Edwards owns (JPM) for clients
Edwards owns (MS) for clients
Edwards owns (NRG) for clients
Edwards owns (ORCL) for clients
Edwards owns (SYT) for clients
Edwards owns (WFMI) for clients

For Brian Kelly
Accounts managed by Kanundrum Capital own (GLD)
Accounts managed by Kanundrum Capital own (GDXJ)
Accounts managed by Kanundrum Capital own (SLV)
Accounts managed by Kanundrum Capital own (ORI)
Accounts managed by Kanundrum Capital own (RGR)
Accounts managed by Kanundrum Capital own U.S. Dollars
Accounts managed by Kanundrum Capital own (TLT)
Accounts managed by Kanundrum Capital own (TIP)
Accounts managed by Kanundrum Capital own (POT) calls
Accounts managed by Kanundrum Capital own Swiss Francs
Accounts managed by Kanundrum Capital are short Euros
Accounts managed by Kanundrum Capital are short (BCS)
Accounts managed by Kanundrum Capital are short (IAI)
Accounts managed by Kanundrum Capital are short (XLF)
Accounts managed by Kanundrum Capital are short (OIH)
Accounts managed by Kanundrum Capital are short (BA)
Accounts managed by Kanundrum Capital are short Mexican Peso
Accounts managed by Kanundrum Capital are short U.K. Pound

For Joe Lavorgna
***No disclosures***

CNBC.com with wires.

Symbol
Price
 
Change
%Change
AIR
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BAB
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CAG
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MDLZ
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SAFM
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SPDR FIN SEL
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BA
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