On Monday the S&P fell, as investors worried that inflation might emerge as a wild car this earnings season, straining corporate outlooks.
Jitters were triggered by Kleenex tissue maker Kimberly-Clark; the company posted a steeper-than-expected drop in quarterly profit on Monday and cut the low end of its full-year forecast as costs of pulp and other goods rose more than twice as much as it expected.
”Everyone is watching margins because of the energy price situation," says Eric Green, senior portfolio manager at Penn Capital Management in a Reuters interview.
In this kind of environment, the Fast Money traders always recommend taking a hard look at what’s working.
What should you be watching?
INTEL & MICRON
According to published reports,Intel and Micron are set to open a new $3 billion manufacturing plant in Singapore to make chips used in smartphones and tablets, highlighting the need for additional production capacity at a time when demand is strong.
What’s the trade?
Both trader Steve Grasso and Pete Najarian suggests playing Intel and rival Micron within a range. Right now both stocks are approaching resistance they say, however on pullback, they’re buyers.
Looking at Micron, Grasso says the range has been $10.50 on the downside and $11.70 on the upside. "And at $22. Intel butts its head,” he adds.
FAST FLASH: BAIDU
The traders are also watching the action in China based Baidu , a Chinese language Internet search provider.
Shares hit an all time high in Monday’s session.
How should you position, now?
Trader Zach Karabell says, “I think the space is in the early innings of a multi-year growth story.” However with that said, he admits valuations in Baidu are very high.
UNUSUAL ACTIVITY: GOODYEAR
Pete Najarian has spotted unusual action in Goodyear .
A higher than usual volume of Goodyear May 17 calls suggests to Najarian that the stock could make a sharp move higher.
CALL OF THE DAY: SELL NETFLIX BEFORE EARNINGS!
Netflix hit another record high on Monday ahead of its earnings report. Shorting this stock has been one of the most painful trades on the Street. But, is it the right call?
Wedbush Morgan analyst Michael Pachter has maintained his sell rating on the stock and still has an $80 price target.
Find out why he’s so bearish. Watch the video now!