Latest String of Economic Reports May Compel Buying
On Tuesday, Wall Street bulls were starting to feel that their convictions had been validated as the S&P hit a five-month high.
“I’m a buyer of the market,” says optimistic Fast Money trader Joe Terranova.
Like his bullish brethren, he argues that it’s a mistake to ignore the string of positive indicators that have flooded the Street over the past few days. “Take last week’s unemployment report – or Monday’s comments from Aloca,” he says.
After the bell on Monday, aluminum giant Alcoa posted revenue that topped expectations and CEO Klaus Kleinfeld gave a generally positive assessment of the overall market, forecasting a 7% rise in global aluminum demand this year. Also he reiterated global demand should double by 2020 in part due to demand for more cars and planes.
Meanwhile,. the latestISM manufacturing index released last week showed the closely watched index rose to 53.9 from 52.7 in November and 50.8 in October. That increase suggested manufacturing activity and construction spending had picked up.
All told, Terranova thinks the path of least resistance is higher.
He believes that the string of positive reports all but compel money managers to hit the buy button; that 's because money pros were cautious into year’s end and the recent S&P gains create a fear of being under-invested and missing the next leg higher.
“I’m not saying all in,” adds Terranova. "I want to see Treasurys above 2% (to signal rotation out of bonds and into equities), but energy and financials are working – I’d play them long.”
Trader Zach Karabell agrees. “I’d also trade with a long bias,” he says. Karabell points to the gains in Caterpillar as a kind of global bellwether. Although Karabell concedes global growth may be slowing – it’s by no means stopping.
"Materials have been one of the weaker areas, so values are quite extraordinary if you believe the recovery is going to drive prices higher," adds Robert Lutts, president and chief investment officer at Cabot Money Management in a Reuters interview.
Fast trader Steve Cortes, however, is on the other side.
He says that some of the tailwinds in the market stems from China’s slowing growth. New economic data showed China’s December import growth fell unexpectedly.
“Right now the market considers bad news out of China to be good news because it makes easing more likely,” he says. “but ultimately bad news is bad news.”
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Trader disclosure: On Jan. 10, 2012, 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 APC; Terranova owns OXY; Terranova owns XOM; Terranova owns VRTS; Terranova owns IBM; Terranova owns CSCO; Terranova owns AXP; Terranova owns SBUX; Terranova owns CSX; Terranova owns SWN; Terranova owns AXP; Karabell is long AAPL; Karabell is long XLF; Karabell is long IBM; Rivertwice is short AA; Karabell is long FCX; Karabell is long calls GOOG; Karabell is long calls AMZN; Cortes is long SO; Cortes is long XLU; Cortes is short Corn; Cortes is short Wheat; Cortes is short Crude; Cortes is short XRT; Cortes is short IYT vs. S&P long; Cortes is short QQQ;
Rivertwice has short puts GS;
Trutina Financial is long QCOM
Trutina Financial is long INTC
Trutina Financial is long GLD
Trutina Financial is long PGM
Trutina Financial is long AA
Trutina Financial is long YUM
Trutina Financial is long MCD
Trutina Financial is long BMY
Trutina Financial is long JNJ
Trutina Financial is long AMZN
Trutina Financial is long AAPL
Trutina Financial is long GWW
Dicker is long oil futures and short call options
Dr. Anthony (Tony) Coles
Gregory Hertz, CFA, CPA, Associate, holds a long position in the securities of Wal-Mart Stores Inc.
Leo Kulp, CFA, Analyst, holds a long position in the securities of Wal-Mart Stores Inc.
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