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Halftime: Financials Emerging as S&P’s Achilles Heel?

Both the Dow and S&P moved higher on Tuesday with bulls finding two areas of the market attractive; technology and retail .

Chatter on the Street suggested both sectors may have been oversold as investors went into ‘sell first and ask questions later mode’ following the Japan quake.

"A lot of stocks got taken down sharply as a result of what was going on in Japan, and very unfairly, particularly in the technology space -- and you are seeing technology and retail kind of lead the charge higher." explains Peter Kenny, managing director at Knight Equity Markets in a Reuters interview.

Meanwhile, investors were not willing to put money to work in the financials . In fact, it was among the few groups struggling and only made nominal gains late in the session. To make matters all the more bearish, both Bank of America and Morgan Stanley sank to a new lows for the year.

Why aren't financials confirming the rally? Are they the S&P’s Archilles heel?

Instant Insights with the Fast Money traders

Trader Brian Kelly worries that bank stocks may in fact be the Achilles heel in the S&P’s rally. He believes that the inability of financials to participate not only diminishes the credibility of the rally but the quality of the whole recovery. “We can’t have an economic recovery if the engine isn’t working – and the engine is the financial system. It’s not transferring money from those who have it to those who need it and without that we can’t have a sustained economic recovery,” he says.

Trader Steve Cortes shares that bearish outlook largely because of price performance. “I’m short Bank of America,” he says. If you look at the performance in BAC over the past month its down about 7% against the S&P which is only 1% lower.”

Joe Terranova is also cautious. He’s worried about the downward spiral in housing -- especially the new reports which suggest the sector is facing a growing number of foreclosures -- and the impact on banks.

Patty Edwards tells the desk she’s long financials but feels it’s important to pick and choose. She likes Bank of Montreal and BlackRock. "Neither of those firms have much exposure to the mortgage mess," she says.

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HOME DEPOT BUY BACK

Shares of Home Depot rallied on Tuesday after the company announced plans to buy $1 billion of its shares.

What should you make of it?

Home Depot is tapping the bond market to do this, explains Joe Terranova. "Normally the Street is not comfortable with that, but I think it works in this case. With the stock a little south of $37 I think there’s upside to $40," he says.

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OTHER BIG BUYBACKS

In fact, Home Depot is among a number of companies buying back their own shares. Take a look:

Company BuyBack Value
JPMorgan $15B
Intel $10B
ConocoPhillips $10B
3M $7B
Wells Fargo $6.2B
SOURCE: Thomson Reuters

What should you make of it?

Steve Cortes finds all the buybacks mixed. "For the near term buy backs have been constructive but it also suggests these companies are not able to reinvest in their core business, nor can they find attractive valuations. In some ways it’s a concession," he says.

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TICK BY TICK: AMAZON SURGES INTRADAY

The traders were also watching the action in Amazon, which climbed higher after the company released details about its "Cloud Player" music service.

The move comes one day after rival eBay announced plans to acquire GSIC Commerce in a move to that could make it a more of a e-tail powerhouse.

What’s the trade?

Steve Cortes suggests looking at Amazon, but not for online retail. "I think it offers some value as a stealth cloud play," he says.

"I love what Amazon is doing on the cloud side, but I think the valuations in eBay are compelling," adds Patty Edwards. She especially likes their acquisition of GSI Commerce.

Brian Kelly is also bullish eBay but for their PayPal division. "The world is going toward mobile payment systems and Ebay is the leader," he says.

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MARKET MYSTERY: WHAT’S WRONG WITH COPPER?

Time for a market mystery: The action in copper has been relatively weak over the past few days, though it did turn higher on Tuesday.

Why hasn’t t Dr. Copper confirmed the market's rally?

Lind-Waldock Senior Market Straetgist. Rich Ilczyszyn thinks the weakness in copper is largely due to fundamental headwinds. He's particularly concerned about the reduction in autos in the wake of the Japan quake. "63 pounds of copper are needed for each auto," he says. And he's also watching the weak data on US housing as another drag on the red metal.

It all suggests that "copper is the most economically sensitive metal of all the metals," explains host Scott Wapner.

Although Joe Terranova thinks the bull story in copper remains in tact with oil over $100 he doesn't expect it to break out.




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Trader disclosure: On Mar. 29, 2011, the 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 Long (CSX). Steve Cortes is Long (SDY). Steve Cortes is Long (EXC). Steve Cortes is Long (SO). Steve Cortes is Long (RIMM). Steve Cortes is Long US Treasuries. Steve Cortes is Long U.S. Dollar vs. euro . Steve Cortes is long U.S. Dollar vs. yen. Steve Cortes is Short (F). Steve Cortes is Short (BAC). Steve Cortes is Short (UNP). Steve Cortes is Short (DBA). Steve Cortes is Short Wheat. Steve Cortes is Short Corn. Joe Terranova owns (AAPL) Puts. Joe Terranova Owns Puts (VRTS). Joe Terranova Owns (AKAM) and (AKAM) Calls. Joe Terranova Owns (CNX), (C), (GS), (JPM), (UPL), (MS), (PBR), (BAX), (TEVA), (IBM), (XOM), (JNPR), (AAPL), (DIS), (CVI), (RSX), (CNQ) and (BTU).

Comcast Is The Parent Company Of CNBC
Comcast Is The Parent Company Of NBCUniversal
GE Owns 49% Of NBCUniversal
GE Owns 49% Of CNBC

PATTY EDWARDS
Edwards is Long (AAPL) for Clients
Edwards is Long (GOOG) for Clients
Edwards is Long (AMZN) for Clients
Edwards is Long (LQD) for Clients
Edwards is Long (LQD) for Clients
Edwards is Long (BKCC) for Clients
Edwards is Long (SPY)
Edwards is Long (QQQ)
Edwards is Long GLD
Edwards is Long (SLV)
Edwards is Long (PGM)
Edwards is Long (SPY) for Clients
Edwards is Long (QQQ) for Clients
Edwards is Long GLD for Clients
Edwards is Long (SLV) for Clients
Edwards is Long (PGM) for Clients
Edwards owns (HD)
Edwards owns (JNK)
Edwards owns (BKCC)
Edwards owns (BMO)
Edwards owns (DIS)
Edwards owns (LQD)

BRIAN KELLY
Accounts Managed by Kelly are Long (ATW)
Accounts Managed by Kelly are Long (BBT)
Accounts Managed by Kelly are Long (DBA)
Accounts Managed by Kelly are Long (EBAY)
Accounts Managed by Kelly are Long (GLD)
Accounts Managed by Kelly are Long (SLV)
Accounts Managed by Kelly are Long (MCP)
Accounts Managed by Kelly are Long (MON)
Accounts Managed by Kelly are Long (TSN)
Accounts Managed by Kelly are Long (VLO)
Accounts Managed by Kelly are Long oil
Accounts Managed by Kelly are Long natural gas
Accounts Managed by Kelly are Long gold
Accounts Managed by Kelly are Long silver
Accounts Managed by Kelly are Long Short (IXG)
Accounts Managed by Kelly are Long Short (XLF)
Accounts Managed by Kelly are Long Short copper

JOE TERRANOVA
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of (CCG)
Virtus Investment Partners Owns More Than 1% Of (CASS)
Virtus Investment Partners Owns More Than 1% Of (CSVI)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (FCFS)
Virtus Investment Partners Owns More Than 1% Of (KRC)
Virtus Investment Partners Owns More Than 1% Of (LDR)
Virtus Investment Partners Owns More Than 1% Of (LPHI)
Virtus Investment Partners Owns More Than 1% Of (NCRI)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (XLE)
Virtus Investment Partners Owns More Than 1% Of (XLF)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLK)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (SUBK)
Virtus Investment Partners Owns More Than 1% Of (WDFC)
Virtus Investment Partners Owns More Than 1% Of (YDNT)
Virtus Investment Partners Owns More Than 1% Of (DOM)

MICHAEL GAMBARDELLA
Gambardella owns (MCP), (AKS), (AA) and (FCX).
J.P. Morgan Acted As Lead Or Co-Manager In A Public Offering Of Securities For (MCP), (AKS), (AA) In Past 12 Months
(MCP), (AKS), (AA), (FCX), (X) Is Or In Past 12 Months Was An Investment Banking Client Of J.P. Morgan
J.P. Morgan Recieved Investment Banking Compensation From (MCP), (AKS), (AA), (FCX), (X) In Past 12 Months
J.P. Morgan Expects To Recieve/Seek Investment Banking Compensation From (MCP), (AKS), (AA), (FCX), (X) In Next 3 Months
An Affiliate Of JPMS Recieved Non-Investment Banking Compensation From (MCP), (AKS), (AA), (FCX), (X) In Past 12 Months
(AKS), (FCX), (X) Is Or In Past 12 Months Was A Client Of J.P. Morgan (Non-Investment Banking Securirites-Related Service, Non-Securities Related Services)
An Affiliate Of JPMS Recieved Non-Investment Banking Compensation From (AKS), (AA), (FCX), (X) In Past 12 Months
(AA) Was A Client Of J.P. Morgan In Past 12 Months (Non-Investment Banking Securities-Related Service)

CNBC.com with wires.

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AMZN
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BAC
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BLK
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BMO
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EBAY
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HD
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MS
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SPDR FIN SEL
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SPDR TEC SEL
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