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Don’t Make This Mistake about Recent Gains in Industrials

On Tuesday, investors were eyeing the terrain ahead, wondering if the S&P gains were an early sign that bulls were about to start their next push.

Largely, industrials led the market after Cummins said 2011 would likely be a record setting year for the company. Also the engine maker set aggressive growth targets - $30 billion in sales by 2015 – that's a whopping 14% increase per year over the period.

Immediately chatter on the floor turned to whether risk was back on. Did Cummins just put a floor under the market by confirming the global growth story?

According to the Fast pros - not so fast. They say it's a mistake to extrapolate Cummins results to the broader market. In fact, in this case, they say Cummins may be signal of weakness.

"Cummins does well when the economy is doing badly," explains trader Brian Kelly. “Higher energy prices generate interest among companies to buy engines which are more fuel efficient. ”Also we’re seeing a lot of emissions standards changing globally, which benefits Cummins but is not a sign of global growth,” he says.

Trader Patty Edwards adds that because so many stocks in the sector pay dividends, the recent strength may be a sign of fear - that investors are only willing to put money to work in stocks that return capital to investors. Also, she says, gains could be nothing more than an oversold bounce.

Even the usually bullish Joe Terranova agrees. “This is stock specific story. I think Cummins is a name to own but I would not interpret the strength in CMI as a sign of strength in the sector overall.”

”When you look at the rest of the world, between the troubles in Europe and weakness in China’s stock market, I think industrials are to be avoided no matter what Cummins says specifically," adds trader Steve Cortes.

Of course, that’s not to say the Fast pros don’t see opportunity. They do. They're simply saying in this environment rather than make broad sectors bets, you have to play stock picker.

Terranova thinks the trade is longJoy Global. “Around $78 that’s a great stock.”

Patty Edwards says if you want to nibble, take a look at Lincoln Electric as well as Chicago Bridge and Iron.

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CHAMBERS’S LAST STAND?

Turning attention to tech, Cisco landed on the trader radar after the company hosted its analyst day and CEO John Chambers made aggressive comments about winning share away from rival Juniper.

How should you trade it?

Joe Terranova can't get on board. "I’m not a buyer. I view Cisco as old technology," he says. "I’d rather own rival Juniper."

Patty Edwards agrees. "I'm not from Missouri - the Show me state – but I need John Chambers to show me something."

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APPLE TO PAY DIVIDEND SOON?

With $76 billion on the balance sheet - will Apple pay a dividend soon? Morgan Stanley sure thinks to – they say the company is ‘more likely than ever’ to return cash to shareholders.

What’s the trade?

Trader Brian Kelly doesn't see it. "Apple’s culture is built on innovation not paying dividends," he says.

Trader Steve Cortes sees the situation a little differently. He thinks the environment may favor a dividend. "I think it’s sensible and it could finally happen now that Steve Jobs isn’t there on a day to day basis," he says.

Although he doesn't expect a dividend, trader Joe Terranova thinks Apple has plenty of upside. "I think the stock trades north of $400 in the next 6-8 months," he says.

What do you think? We want to know!

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BEST BUY BUZZKILL

Best Buy also landed on the trader radar with the stock slipping to a new 52-week low after the retailer said earnings came in below expectations. Best Buy also cut its 2011 forecast.

What should you make of it? Find out from Brian Sozzi, analyst at Wall Street Strategies. Watch the video now!




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Trader disclosure: On Sep 13 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Terranova owns (XOM); Terranova owns (DIS); Terranova owns (WFM); Terranova owns (LULU); Terranova owns (MSFT); Terranova owns (TM); Terranova owns (JWN); Terranova owns (ORCL); Terranova owns (PEP); Terranova owns (MA); Terranova owns (BX); Terranova owns (GS); Terranova owns (DAR); Terranova owns (CAT); Terranova owns (VRTS); Terranova owns (AAPL); Terranova owns (CAT); Terranova owns (CVI); Terranova owns (IBM); Terranova owns (FCX); Cortes is long (SO); Cortes is long Treasuries; Cortes is long Yen; Cortes is short Gold; Cortes is short Aussie; Cortes is short Corn; Patty Edwards is long: Tech SPDR XLK

For 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 Building Materials Holdings
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 (KRC)
Virtus Investment Partners Owns More Than 1% Of (LHO)
Virtus Investment Partners Owns More Than 1% Of (NRCI)
Virtus Investment Partners Owns More Than 1% Of Sun Pharmaceutical Industries Ltd
Virtus Investment Partners Owns More Than 1% Of (RLI)
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 (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 Domino's Pizza UK & IRL PLC

For Patty Edwards:
Trutina Capital is long Amazon (AMZN)
Trutina Capital is long Apple (AAPL)
Trutina Capital is long Citigroup (C)
Trutina Capital is long Google (GOOG)
Trutina Capital is long McDonalds (MCD)
Trutina Capital is long Oracle (ORCL)
Trutina Capital is long Qualcom (QCOM)
Trutina Capital is long SPDR Gold Trust (GLD)
Trutina Capital is long Yum Brands (YUM)
Trutina Capital is long Microsoft (MSFT)
Trutina Capital is long (CAT)

For Brian Kelly
Accounts managed by Brian Kelly Capital are long Euro
Accounts managed by Brian Kelly Capital are long tlt
Accounts managed by Brian Kelly Capital are long slv puts
Accounts managed by Brian Kelly Capital are long mcp
Accounts managed by Brian Kelly Capital are long mon
Accounts managed by Brian Kelly Capital are long Jjg
Accounts managed by Brian Kelly Capital are short Jjc
Accounts managed by Brian Kelly Capital are short us dollar
Accounts managed by Brian Kelly Capital are short FXA

For Brian Sozzi
**No disclosures

For Win Thin
**No disclosures




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