GO
Loading...

Halftime: Flurry of New Gadgets to Drive Chip Stocks?

On Thursday, while much of the market was focused on weakness in the Dow and S&P 500 , the Fast Money traders were focussed on gains in the semiconductor space, looking to see if these stocks were about to make a run higher.

Although disappointing same-store sales dented hopes about the recovery and energy shares fell with oil prices , chip stocks hit new 52 week highs as the consumer electronics show kicked off in Vegas.

It appears investors are making bullish bets on demand for microprocessors, as the world readies itself for a flurry of new tablet computers, as well as the promise of Internet connected TVs and cars that connect with your smartphone

What’s the trade? How should you position now?

Instant Insights with the Fast Money traders

Guy Adami is bullish Qualcomm, not only for its acquisition of Atheros but also for technical reasons. “$50 had been resistance but now the stock is powering through that level,” he says. “I’m a buyer with a tight stop around $50.50. It speaks volumes that the stock is setting a new 52-week high after a major acquisition like that.”

And on the flip side of the coin Adami thinks Intel is a stock to avoid. “It’s the notable laggard,” he says.

”Intel is just out of favor with investors,” echoes Steve Grasso. "I’d just stay away from that name. I don’t care who they acquire. That name just can’t find buyers in this space.”

”I like Intel as dead money,” adds Jon Najarian. “It works for someone who wants to hold a stock and write covered calls against it.” However Najarian concedes he's much more interested in NVIDIA due to bullish options buying and their move with Microsoft.

Always the contrarian Steve Cortes has his doubts about the strength in the chip stocks. “I’m watching the Nasdaq which isn’t really moving,” he says. That suggests to him we’re seeing capital shuffling rather than new buying .

And in the space, Cortes also suggests watching Microsoft . “It’s been outperforming Apple over the past few weeks,” he says. “I’m not saying commit money to Microsoft, but it’s certainly a trend worth watching.”

------------

CHRISTMAS TO FORGET

If you were hoping to find new evidence that the recovery had taken hold, don’t look at the latest data out of the retail sector.

Top retailers reported disappointing December sales with many stores forced to slash priced to attract business. Also a post-Christmas blizzard dragged down sales during that critical week after Christmas but before New Year's. (The week after Christmas accounts for 15 percent of seasonal sales.)

Companies ranging from Macy's and Target to teen clothing store American Eagle Outfitters were among those whose results fell far short of Wall Street's forecasts.

"The turbulence is here to stay," says David Bassuk, a managing director at consulting firm AlixPartners. "The consumer is still very sensitive to even slight fluctuations in prices -- the consumer is still looking for deals."

Looking at the numbers more closely, December sales at stores open at least a year for the 28 major retailers tracked by Thomson Reuters rose 3.1 percent, below Wall Street's forecast of a 3.4 percent increase.

In case you're curious, some chains that beat forecasts included department stores J.C. Penney and Dillard's and off-price retailer TJX.

What should you make of it?

These results remind me that retail is a bifurcated market, says Guy Adami. You can’t throw a dart in this space. You have to do your homework. For me the best name to trade is Abercrombie & Fitch.

I’m a buyer of Target , says Steve Grasso. I think the stock was oversold on this news.

------------

CHART OF THE DAY

Take a look at the S&P retail ETF, the XRT climbed about 30% since the beginning of September, outperforming the S&P. But now it's starting to lag the markets.

What’s the trade?

I’m short the XRT, says Steve Cortes. I expect it takes back the entire rally. These stocks have run on an enormous amount of good news – can the news possibly get that much better? And ccross the spectrum we’re seeing people pulling back and I think it’s problematic for the sector.

------------

COMMODITIES BREAKDOWN

Looking at commodities, the traders are closely watching key technicals in gold for signs of a further breakdown.

If gold breaks its 55-day moving average it will be the first time since August, says host Melissa Lee.

The fact that gold hasn’t bounced is some cause for concern, adds Guy Adami. I'd think about taking profits and reestablishing a position lower.

I’m seeing a lot of buyers of the 120 puts in the GLD , adds Jon Najarian. I think we may test that level.

------------

REYNOLDS AMERICAN

Shares of tobacco company Reynolds American hit a 52 week high after UBS upgraded the stock to 'Buy' from 'Neutral' on EPS growth and prospects of more cash distribution.

"We expect the company will buy back stock starting in June," says analyst Nik Modi during a love interview on Fast Money. "We’re looking for about $250 million this year," he says.

What else should you know about the company? Watch the video now and find out!



______________________________________________________
Got something to to say? Send us an e-mail at fastmoney-web@cnbc.com and your comment might be posted on the Rapid Recap. If you'd prefer to make a comment, but not have it published on our Web site, send those e-mails to fastmoney@cnbc.com.

Trader disclosure: On Jan. 6, 2011, following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Steve Cortes Is Short (LVS). Steve Cortes Is Short (BCS). Steve Cortes Is Short (XRT), Is Long S&P. Cortes Is Short (XHB), Is Long S&P. Steve Cortes Owns (TSN). Cortes Owns (EXC). Steve Cortes Is Long Treasuries. Steve Cortes Is Short Gold. Steve Cortes Is Short Corn. Guy Adami owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU) and (YHOO). Jon Najarian owns (FRO) calls. Jon Najarian owns (AAPL), is short (AAPL) calls. Jon Najarian owns (AEO), is short (AEO) calls. Jon Najarian owns (ARMH), is short (ARMH) calls. Jon Najarian owns (BP), is short (BP) calls. Jon Najarian owns (NVDA), is short (NVDA) calls. Jon Najarian owns (RIMM), is short (RIMM) calls. Jon Najarian owns (WMT), is short (WMT) calls. Jon Najarian owns (VCLK), is short (VCLK) calls. Jon Najarian owns (TWX), is short (TWX) calls; Jon Najarian owns (MIPS)
; Steve Grasso owns (ASTM), (BA), (BAC), (BWC), (C), (CSCO), (JPM), (LIT), (LPX), (MOT), (MHY), (NDAQ), (PFE), (PRST), (S) and (X).

GE is the parent company of CNBC
NBC Universal is the parent company of CNBC

GUY ADAMI
Adami's wife works at (MRK)

STEVE GRASSO
Stuart Frankel & Co and its partners own (AAPL)
Stuart Frankel & Co and its partners own (AMGN)
Stuart Frankel & Co and its partners own (BP)
Stuart Frankel & Co and its partners own (CUBA)
Stuart Frankel & Co and its partners own (GE)
Stuart Frankel & Co and its partners own (GERN)
Stuart Frankel & Co and its partners own (HPQ)
Stuart Frankel & Co and its partners own (HSPO)
Stuart Frankel & Co and its partners own (NWS.A)
Stuart Frankel & Co and its partners own (NYX)
Stuart Frankel & Co and its partners own (OPEN)
Stuart Frankel & Co and its partners own (PDE)
Stuart Frankel & Co and its partners own (PFE)
Stuart Frankel & Co and its partners own (PRST)
Stuart Frankel & Co and its partners own (RDC)
Stuart Frankel & Co and its partners own (TLM)
Stuart Frankel & Co and its partners own (XRX)
Stuart Frankel & Co and its partners own (SDS)
Stuart Frankel & Co and its partners own (UNM)
Stuart Frankel & Co and its partners are short (QQQQ)
Stuart Frankel & Co and its partners are short (AAPL)

NIK MODI

***NO DISCLOSURES ON RAI

COLIN GILLIS
BGC Financial and/or its affiliates, expect to receive or seek compensation for investment banking services within the next three months from (AAPL)
BGC Financial LP and/or its affiliates, expect to receive or seek compensation for investment banking services within the next three months from (MSFT)

DEBORAH WEINSWIG
An Employee Of Citigroup Global Markets Or Affiliates Is A Trustee Of (TGT)
Citi Employees Own (JCP), (WMT)
Citigroup Global Markets Or Affiliates Owns 1% Or More Of (SKS)
Citigroup Global Markets Or Affiliates Has Managed Or Co-Managed An Offering Of (HD), (TGT), (WMT) In Past 12 Months
Citigroup Global Markets Or Affiliates Has Received Investment Banking Compensation In Past 12 Months From (HD), (KR), (SKS), (TGT), (WMT)
Citigroup Global Markets Or Affiliates Expects To Receive/Seek Investment Banking Compensation From (KR) In Next 3 Months
Citigroup Global Markets Or Affiliate Received Non-Investment-Banking Compensation In Past 12 Months From (JCP), (KSS), (M), (SWY), (SVU), (TGT), (WAG), (WMT), (COST)
(HD), (KR), (SKS), (TGT), (WMT) Are Or In Past 12 Months Were Investment Banking Clients Of Citigroup Gloabl Markets
(CVS), (HD), (JCP), (KSS), (KR), (M), (SWY), (SKS), (SVU), (TGT), (WAG), (WMT), (COST) Are Or In Past 12 Months Were Non-Investment Banking Clients Of Citigroup Global Markets (Securities-Related Services)
(HD), (JCP), (KSS), (KR), (M), (SWY), (SVU), (TGT), (WAG), (WMT), (COST) Are Or In Past 12 Months Were Non-Investment Banking Clients Of Citigroup Global Markets (Non-Securities-Related Services)
Citigroup Global Markets Is A Market Maker In (CVS), (M), (COST)
Citigroup Global Markets And/Or Affiliates Has A Significant Financial Interest In Relation To (HD), (JCP), (KSS), (KR), (LOW), (JWN), (SWY), (SKS), (SVU), (TGT), (WMT), (COST)
Citigroup Global Markets Or Affiliates Owns 5% Or More Of (SKS)

CNBC.com with wires.

Contact Halftime Report

  • Showtimes

    Halftime Report - Weekdays 12p ET
    Fast Money - Weekdays 5p ET