Halftime: Commodity Weakness To Ripple Across Market?

On Friday, chatter on the Street had everything to do with China and whether Beijing's latest move pulled the plug any hopes for a year-end rally.

Overnight, The People's Bank of China raised bank reserve requirements for the second time in two weeks and the fifth time this year, stepping up its fight to rein in prices, a move that could temper growth.

"Commodities are seeing some increased pressure on China's news because any attempt to tighten their policy is going to dampen their ability to grow," explains Michael McGervey, president of McGervey Wealth Management in a Reuters interview.

"Since China obviously uses a lot of resources, if their growth is tempered it will have a negative impact on demand for commodities and materials."

Although these developments seem rather bearish for stocks, the Fast Money desk isn’t all that worried.

How come? What do they know?

Instant Insights with the Fast Money traders

Generally industrial metals are very sensitive to this kind of news. I would have thought commodities would be down more, says Joe Terranova. That leads me to believe it’s already priced in.

Don’t forget that Caterpillar inked its biggest deal in the company’s history this week to acquire Bucyrus , he adds. That’s a bullish sign for resources, long-term. It suggests to me there’s solid demand.

Also there’s been a great deal of M&A happening in the steel and coal space, adds Steve Grasso. Bullish headlines are trumping the negatives.

For example Walter Energy is in talks to buy Canadian peer Western Coal for $3.24 billion to tap surging Asian demand for steelmaking coal. I suspect M&A activity and chatter will counter-balance the headwinds generated by China right now and resources will stabilize the market at current levels.

I’m seeing a lot of options activity in Walter Energy, adds Jon Najarian. This one turned and burned to the upside, he says. “I’m seeing big spreads into next year. I think people are looking for a lot more upside.

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GM DAY 2

The Street is still fascinated with the GM IPO and how shares are trading in the wake of so much fuss. Now chatter is focused on whether shares will break below $33 – the IPO price.

What should you be watching?

I think $33 is key, says Steve Grasso. As long as it protects $33 I’m comfortable technically – but I’m negative on fundamentals.

I’d watch GM over the next 10 days, adds Joe Terranova. All the hype will start to fall away and we can really see how this stock trades.

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CALL OF THE DAY: DEERE

Shares of Deere have seen a 40% run up this year, with Henry Kirn Of UBS convinced the ag equipment maker has further room to run.

How come?

His upgrade has everything to do with the spike in prices for one specific commodity. Find out more in our exclusive interview with Kirn. Watch the video now.

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Trader disclosure: On November 19, 2010, the day this video was recorded, following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Terranova owns (UPL), (C), (CRM), (PEP), (VRTS), (OXY), (GS), (POT), (AAPL), (ORCL), (MCD), (NKE), (IBM); Jon Najarian owns (MS) short calls; Jon Najarian owns (ANN) short calls; Jon Najarian owns (DLTR) short calls; Jon Najarian owns (DG) short calls; Jon Najarian owns (WMT) short calls; Jon Najarian owns (CSCO) short calls; Jon Najarian owns (NKE) short calls; Jon Najarian owns (FSLR) short calls; Jon Najarian owns (LVS) short calls; Jon Najarian owns (WYNN) short calls; Jon Najarian owns (DF) call spreads; Jon Najarian owns (JOYG) call spreads; Grasso owns (ASTM), (BA), (BAC), (BWC), (C), (CSCO), (JPM), (LPX), (MOT), (MHY), (NDAQ), (PFE), (PRST)

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 (CMS)
Virtus Investment Partners own more than 1% of (CSC)
Virtus Investment Partners own more than 1% of (CSVI)
Virtus Investment Partners own more than 1% of (FCFS)
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 (SOA)
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 (WMB)
Virtus Investment Partners own more than 1% of (YDNT)
Virtus Investment Partners own more than 1% of (DRYS)

For Patty Edwards
Edwards owns (FL) for clients
Edwards owns (GLD) for clients
Edwards owns (HPQ) for clients
Edwards owns (NKE) for clients
Edwards owns (SPX) for clients
Edwards owns (SH) for clients
Edwards owns (TTM) for clients

For Steve Grasso:
Stuart Frankel & Co and it’s partners own (AAPL)
Stuart Frankel & Co and it’s partners own (CSCO)
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 (HSPO)
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 Its Partners Own (UNM)
Stuart Frankel & Co and it’s partners are short (QQQQ)
Stuart Frankel & Co and it’s partners are short (MCD)
Stuart Frankel & Co and it’s partners are short (AAPL)

For Henry Kirn
UBS owned 1% or more of (DE)
UBS makes a market in (DE)
UBS makes a market in (AGCO)




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