On Wednesday the Fast Money traders were squarely focused on market chatter suggesting serious challenges may lie ahead for the stocks.
Specifically, 3 key developments captured the attention of our traders as they attempted to determine if the Street is starting to receive early signs of a sell-off.
Here’s what our pros are watching:
Development #1: Juniper wiped out $3 billion in value after the networking company warned of weak sales.
Juniper made clear that it is being hit on three fronts: businesses are delaying spending, U.S. government agencies are cutting budgets and Japan is still coping with the aftermath of the March earthquake and tsunami.
And Street analysts didn’t hesitate to pile on with downgrades. Take a look:
|Firm||Previous Rating||New Rating|
|Goldman||Removes ‘Conviction Buy’|
|William Blair||Outperform||Market Perform|
Analysis: Trader Brian Kelly is very worried that Juniper results signal enterprise spending is starting to slow, considerably. “Enterprise spending had been a pillar of the economy; that was holding things up. But we’re starting not to see that.” Kelly thinks that’s significant. From that “you can now start to draw conclusions about the economy.”
Trader Steve Cortes adds that networking companies such as Juniper and Cisco are dependent on government revenue and are now struggling because of austerity, particularly at the state and local level. “I see further downside,” he says.
Trader Zach Karabell cautions investors not to think about government austerity as a binary event. In other words, it's not negative for every company. “IBM is seeing an increase in business from government because (austerity means that) government needs to become more efficient.”
Development #2: S&P further downgraded the credit rating of Greece.
The rating agency says Greece will likely will need a new and bigger debt restructuring within the next two years. The debt-riddled country is the lowest-rated country in the world by S&P, which downgraded it 8 notches June 13.
Analysis: Trader Steve Cortes is closely watching the action in the euro and the action in stocks of Spanish and Italian banks. “If you look at Santander, BBVA and UniCredit, they’re getting killed. They have give up the entire second Greece bailout rally.”
Cortes calls these developments 'incredibly important' - it should remind investors that the financial woes of Europe are far from over.
Trader Stephen Weiss agrees and thinks once the US debt ceiling drama draws to a conclusion – market pros will again return their focus to the slowing economies of Europe and the US. In fact, he thinks it's already starting to happen. He points to weakness in Caterpillar , Deere and UPS to support his thesis. “You’ve got to be cautious.”
Development #3: Corning lowered its forecast warning that manufacturers such as Sony and Samsung are cutting their TV sales forecasts.
CorningCEO Jim Flaws says, "there is a sense that the economies around the world are not growing as fast as people had originally hoped." Results were amplified by 3M, which also warned of falling TV prices earlier in the week.
Analysis: Trader Steve Cortes takes this development as another sign that the labor market is weak. “If you look at PAYX it’s hitting a new 2011 low. It’s a dreadful chart. It indicates that the labor market isn’t improving.”
Trader Brian Kelly thinks this developments is reason to establish a short position in electronics retailer Best Buy.
On a positive note, shares of Dunkin’ Donuts traded sharply higher Tuesday after pricing at $19 per share Tuesday night.
Should you play this stock?
Trader Zach Karabell says he would not dunk into this stock at current prices. “I’m not that excited about the company. I wouldn’t place my bets on robust spending of the middle class.”
Trader Steve Cortes is on the other side, entirely. “I love Dunkin’ coffee – and I see this as an affordable luxury. I’m a buyer,” he says.
THE OIL TRADE
The spot price of oil fell on Wednesday after new data showed a build in U.S. inventories.
What’s the trade now?
Find out from Dan Dicker, Mercbloc president and author of Oil’s Endless Bid. Watch the video now!
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Trader disclosure: On July 27, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Cortes owns U.S. Treasuries; Cortes is short (LVS); Cortes is short (LULU); Cortes is short (IYT); Cortes is short the Euro; Cortes is short Copper; Cortes is short Corn; Karabell owns (DOW); Karabell owns (GOOG); Karabell owns (SBUX); Weiss owns (COP); Weiss owns (DVN); Weiss owns (AKAM); Weiss owns (SLV); Weiss owns (UGL); Weiss owns (CAT); Weiss owns (QCOM); Weiss owns (TWM); Weiss owns (BTU)
Accounts Managed By Brian Kelly Capital Own (TLT) calls
Accounts Managed By Brian Kelly Capital Own (GLD) calls
Accounts Managed By Brian Kelly Capital Own (GDXJ) calls
Accounts Managed By Brian Kelly Capital Own (JJC) calls
Accounts Managed By Brian Kelly Capital Own (XLI) puts
Accounts Managed By Brian Kelly Capital Own (SLV) calls
Accounts Managed By Brian Kelly Capital Own (VIX) calls
Accounts Managed By Brian Kelly Capital Own Australian Dollar
Accounts Managed By Brian Kelly Capital Own New Zealand Dollar
For Zach Karabell
Rivertwice Capital is short (AN)
Rivertwice Capital is short (SPY)
Rivertwice Capital is short (XLF)
Rivertwice Capital is short (QQQ)
For Dan Dicker
Dan Dicker Owns Weatherford
Dan Dicker Is Short Crude
CNBC.com with wires.