The S&P traded near break-even on Thursday as investors grappled to understand if developments in Egypt were bullish or bearish for stocks.
As you may know, reports have surfaced suggesting that Egypt president Hosni Mubarak may step down as soon as Thursday night.
That headline thrust oil and the entire energy sector into the spotlight again, as investors try to digest what the change means broadly for the Middle East.
”Is Egypt fighting for democracy or is this Iran 1979?” says esteemed energy expert Stephen Schork of the Schork Reporton CNBC’s Fast Money. “It could be explosive situation over the next couple of hours.”
And that leads to the obvious question; what are the possible outcomes? And what does it mean for oil and energy?
Lower Oil Scenario
”If Mubarak steps down and hands over power to the VP it’s bearish for oil,” explains Schork to the Fast Money desk. “It holds the status quo and maintains the friendly relationship with the West. It would be an easy transition.”
That’s positive for world peace but negative for oil. According to Schork this scenario is enough for oil to skid lower and potentially test $80.
Higher Oil Scenario
Schork tells us the bullish oil scenario is if reports are wrong and Mubarak holds power or if he steps down and the Muslim Brotherhood seizes power. In these cases the market will continue to price in a potential disruption to the flow of oil through Suez.
What’s the trade?
Schork is leaning toward the lower oil scenario. “Right now I’m a buyer of oil in the low 80’s and seller in the 90’s,” he says.
Without a major geo-political catalyst he just doesn’t buy calls for $100 oil; he's especially skeptical that oil can climb that high as a ripple from global growth. “When you net that back to what that means to the consumer it’s $3.50 gas,” he says. “I just don’t think the consumer can handle $3.50 gas. Fair market value for oil is between $80 and $90.”
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CISCO: NO LONGER TECH BELLWETHER?
It appears Cisco is no longer the tech bellwether it once was. The tech sector shrugged off the company's disappointing report; in fact some of Cisco's smaller rivals hit fresh highs.
What’s the trade?
It seems the issues facing Cisco are Cisco specific, says Guy Adami. It stands to reason that if Cisco is losing, somebody else is gaining market share. In the space I’ve got Juniper on the radar. It may be a tad ahead of itself but I think it ultimately wins.
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Trader disclosure: On Feb. 10, 2011, 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), (C), (GS), (INTC), (MSFT), (NUE) and (BTU). Grasso owns (ASTM), (BA), (BAC), (BWC), (C), (CSCO), (JPM), (LIT), (LPX), (MT), (MHY), (NDAQ), (PFE), (PRST) and (S). Jon Najarian owns (AKAM), is short (AKAM) calls. Jon Najarian owns (AEO), is short (AEO) calls. Jon Najarian owns (ECA), is short (ECA) calls. Jon Najarian owns (FCX), is short (FCX) calls. Jon Najarian owns (BBY), is short (BBY) calls. Jon Najarian owns (GM), is short (GM) calls. Jon Najarian owns (V), is short (V) calls. Jon Najarian owns (WMT), is short (WMT) calls. Jon Najarian owns (IBM), is short (IBM) calls. Jon Najarian owns (RIMM), is short (RIMM) calls. Jon Najarian owns (CBOE), is short (CBOE) calls. Jon Najarian owns (CME), is short (CME) calls. Jon Najarian owns (NYX), is short (NYX) calls. Jon Najarian owns (JNPR), is short (JNPR) calls. Jon Najarian owns (WFMI), is short (WFMI) calls. Jon Najarian owns (GDX) puts. Steve Cortes owns (CLX), (SVU), (SWY), (PM), (MO) and (CME). Cortes is long US Dollar vs. Australian Dollar and British Pound. Cortes is short Crude. Cortes is short (XLE) vs. S&PCortes is short (LVS). Cortes is short (CBOE).
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GUY ADAMI
Adami's wife works for (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 (ABX)
Stuart Frankel & Co and its partners own (CUBA)
Stuart Frankel & Co and its partners own (GERN)
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 (PDE)
Stuart Frankel & Co and its partners own (PFE)
Stuart Frankel & Co and its partners own (PRST)
Stuart Frankel & Co and its partners own (SDS)
Stuart Frankel & Co and its partners own (XRX)
Stuart Frankel & Co and its partners own (S)
Stuart Frankel & Co and its partners own (SDS)
Stuart Frankel & Co and its partners are short (QQQQ)
Stuart Frankel & Co and its partners are short (AAPL)
Stuart Frankel & Co and its partners are short (TIF)
DAN NILES
Alpha One Capital Partners Own (FFIV)
Alpha One Capital Partners Own (AAPL)
Alpha One Capital Partners Own (ERIC)
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