Although the Dow and S&P only traded modestly higher on Thursday, the action in the market may be anything but lackluster.
In the morning bulls attempted to push stocks above their 2010 highs, buoyed by strong earnings, better than expected jobs data, and China GDP.
However banks were like an old ball and chain that the bulls just couldn’t shake and weakness kept gains to a minimum.
What should you make of it? How should you position now?
Instant Insights with the Fast Money traders
Stocks don’t lie, people do, reminds Guy Adami and I think weakness in BofA is trying to tell you something. It makes me wonder if the S&P is a little frothy. I don’t believe we can have a sustained meaningful rally in the S&P as long as the banks continue to underperform.
For those investors who argue that weakness in BofA is all about the put-backs, I remind you that BofA was doing very poorly before the mortgage put-back issue, adds Steve Cortes.
Elsewhere in the space small regional banks such as Comerica , M&T, and Hudson – are all selling off sharply. More negatives for the sector, broadly.
Another big reason for the market paring gains is the stronger dollar , adds Steve Grasso. Comments from Geithner suggested he sees no need for further weakness in the currency. I'm also watching the action in the Aussie dollar. Weakness in this currency is also having a negative impact on the S&P.
There's no question that the market stuttered at mid-session, adds Jon Najarian. I'm noticing a lot of protective put buying in BofA as well as Caterpillar and Terex.
BROKERS BUCK THE TREND
The desk is also keeping a close eye on Jefferies, which is up sharply despite weakness in the broad sector.
What should you make of it?
It’s a great company, says Guy Adami. And frankly I think this company would be a cheap stock for a bigger name to gobble up. Sometimes where there’s smoke there’s fire.
TOPPING THE TAPE: FREEPORT MCMORAN
The traders are keeping a close eye on Freeport McMoRan which is making a run at 52 week highs after the world's second largest copper producer posted strong earnings and boosted its annual dividend by 67%. Also the company said it's eyeing agressive expansion and may restart copper mines.
What’s the trade?
On a valuation basis FCX is still relatively inexpensive, says Guy Adami. However FCX is highly correlated to the price of copper. If you believe the dollar is near its bottom that bodes poorly for this stock. If you want to play it long I’d also buy put protection.
I expect FCX as well as BHP , CAT and other resource names to follow physical resources lower, says Steve Cortes. Don’t forget that during the intense stock market rally on Wednesday gold and oil did not participate to the same degree. I think that’s bearish.
TICK BY TICK: CAT
Shares of Caterpillar rolled over Thursday after the stock hit 52 week highs earlier on the back of its strong third quarter report and full year guidance raise.
What’s the trade?
My clients are rotating out of Caterpillar and going long Deere , says Steve Grasso.
NETFLIX TURNS BIGGEST BEARS; GROWTH NUMBERS STUPEFYING
Netflix topped the Nasdaq Thursday after the firm posted a 26% jump in profits and a whopping 52% increase in subscribers from last year.
Jason Helfstein from Oppenheimer changed his negative opinion on the company after the latest earnings report. Hear why. Watch the video now!
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Trader disclosure: On Oct. 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; Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Cortes is short crude oil; Cortes is short gold; Cortes is short (BIDU); Cortes is short (RSX); Cortes is short the U.K. Pound; Cortes owns U.S. Treasuries; Cortes owns the S&P 500; Jon Najarian owns (AMZN) calls; Jon Najarian owns (CAT) calls; Jon Najarian owns (EBAY) calls; Jon Najarian owns (GS) calls; Jon Najarian owns (MCD) calls; Jon Najarian owns (NFLX) calls; Jon Najarian owns (SNDK) calls; Jon Najarian owns (CREE) call spreads; Jon Najarian owns (NTRI) call spreads; Grasso owns (ASTM), (BA), (BAC), (C), (CSCO), (JPM), (LPX), (MO), (MOT), (NDAQ), (PFE), (PRST)
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