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Halftime: Are Retailers Cracking or Crackling?

With so much talk about the weak consumer, investors were all but stunned by new results which suggest consumer are willing to open their wallets, after all.

8 out of 10 retailers who report same store sales beat estimates for September – some of them posting big beats. And to make the results all the more surprising -- teen specialty names performed particularly well.

Take a look at some of the big beats.

RETAIL SALES – THE BIG BEATS

Sept. Same-store sales
Expected. Actual

Nordstrom 4% 8%
Macy’s 3% 5%
Limited 4% 12%
Abercrombie 3% 13%
Aeropostale -2% 3%
The Buckle -5% 9%
Zumiez 12% 17%

How should you position now!

Instant Insights with the Fast Money traders

The surprise was that specialty retail was so strong, muses Joe Terranova. A good back-to-school season typically bodes well for the holidays. There’s a high correlation there. If you’re looking for a trade Costco is getting beaten up. I’d buy the weakness.

The fact that the specialty names performed so well is making me incrementally more bullish, echoes Jon Najarian. That says consumers are more confident going into stores where they know they will play more money. And I don’t think this is a one-off event, he adds. I’m seeing traffic in stores increase dramatically. It seems to me it’s better than it been in the last 6 months. That bodes well for the holidays.

If you're looking for a trade, I’m watching Abercrombie , says Steve Grasso. The shorts got very bold when the company reported a sharp increase in inventory back in August. If this stock trades above $42.5 I think it’s off to the races.

I’m skeptical of the retailers broadly, counters Steve Cortes. Considering the run these names have already had I can’t get excited. And with 10% unemployment they’re in tough environment.



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MARKETS ON HOLD AHEAD OF BIG JOBS REPORT

Looking at the major averages, investors appear cautiously bullish ahead of the jobs report. Although the S&P traded lower, it held above 1150. That's technically significant because 1150 had once been a level of resistance. It suggests a level that was once a ceiling may have now become a floor.

What’s the trade?

Technicals are more important than ever, says Steve Grasso and technically the market is performing well. I expect the S&P continues higher. The next level to watch is 1172.

It seems to me the market movements are all about the movements in the dollar , says Joe Terranova. They're inversely correlated. The question becomes how much QE2 is already priced in – I think it’s $500 billion. If we get a stronger than expected jobs report that may put a ceiling on QE2. Should that happen I'd expect the dollar declines to stall and that could send stocks lower.

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CLOUD BURST CONTINUES

Cloud stocks traded mostly lower Thursday after yesterday's steep drop on the back of Equinix's warning. Meanwhile Goldman Sachs told investors to buy VMWare and Akamai on the weakness.

How should you game it?

I dipped my toe in Akamai on Thursday, reveals Jon Najarian. The sell-off in this name didn’t make sense to me.

Looking at the sell-off, I’m a buyer of Salesforce.com on the dip, says Joe Terranova. Otherwise, I’d move to the sidelines for a while.

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GOLD SETS YET ANOTHER RECORD

Spot gold hit an all-time peak for a third straight trading session, rising above $1,355 on Thursday.

What's the trade?

If gold closes weakly I’ll be tempted to get short, says Steve Cortes. I think we may be looking at the top.

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TAKE YOUR POSITION: ALCOA

Alcoa traded slightly lower Thursday ahead of its earnings report today due the close.

How should you position?

The stock has already made a 26% move, says Jon Najarian. Although I’m holding calls – unless I see strong institutional interest this afternoon -- I plan on being out of my positions before they report.

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MARKET BUZZKILL: NATURAL GAS

The spot price of nat gas declined sharply on Thursday pulling down coal stocks.

Does the move present an opportunity?

I suspect it’s a short term event but nonetheless it will probably hit coal stocks pretty hard, explains Steve Grasso.

Nat gas is the most vicious and protracted bear market I’ve ever seen in my career, says Steve Cortes. Any pop is made to be sold.

I’m a buyer of nat gas, counters Joe Terranova, but only as a long-term portfolio play.


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Trader disclosure: On Oct. 7, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Jon Najarian Owns (ANF), Is Short (ANF) Calls; Jon Najarian Owns (LTD), Is Short (LTD) Calls; Jon Najarian Owns (AEO), Is Short (AEO) Calls; Jon Najarian Owns (AA) Call Spreads; Jon Najarian Owns (DCTH) Call Spreads; Jon Najarian Owns (SVNT) Call Spreads; Cortes Is Short (XLF); Cortes Is Short (BAC); Cortes Is Short (BIDU); Cortes Is Short Euro; Cortes Is Short Mexican Peso; Cortes Is Long German Bonds; Joe Terranova Is Long (EOG), (APA), (AAPL), (OIH), (VRTS), (XBI), (ARUN), (IBM), (XBI), (C), (ORCL), (PEP), (OXY), (SU), (JOYG), (RIG), (IBM), (HES), (RSH), (UPL); Grasso owns (ASTM), (BA), (BAC), (C), (CSCO), (JPM), (LPX), (MO), (MOT), (NDAQ), (PFE), (PRST)

For Steve Grasso:
Stuart Frankel & Co and it’s partners own (AMGN)
Stuart Frankel & Co and it’s partners own (BAX)
Stuart Frankel & Co and it’s partners own (COG)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HPQ)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (MERC)
Stuart Frankel & Co and it’s partners own (NWS.A)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PDE)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own (RDC)
Stuart Frankel & Co and it’s partners own (TLM)
Stuart Frankel & Co and it’s partners own (XRX)
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners are short (QQQQ)

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 (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 (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 (XLB)
Virtus Investment Partners own more than 1% of (XLP)
Virtus Investment Partners own more than 1% of (XLY)
Virtus Investment Partners own more than 1% of (XLF)
Virtus Investment Partners own more than 1% of (XLI)
Virtus Investment Partners own more than 1% of (XLU)
Virtus Investment Partners own more than 1% of (SUBK)
Virtus Investment Partners own more than 1% of (WDFC)
Virtus Investment Partners own more than 1% of (YDNT)
Virtus Investment Partners own more than 1% of (DRYS)



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