Fed Outcomes: Fast Pros Trade 3 Likely Scenarios

Tuesday, 19 Jun 2012 | 6:48 PM ET

There seems to be little doubt on Wall Street that the outcome of the FOMC meeting on Wednesday will move markets.

But pros can’t agree what the Fed will actually do. Some think that recent economic data out of Europe will compel the US central bank to act aggressively to prevent a slowdown from rippling across the Atlantic.

Others say the Fed will keep their powder dry so they can make a big move in the event Spain or Italy melts down.

But no matter what happens the Fast Money pros agree there are trades to be made. Following are the most likely scenarios and the resulting moves to make.

Tradeventure: Fed to Announce QE3?
In anticipation of the Fed meeting tomorrow, the Fast Money traders discuss which of three scenarios is most likely to happen.

Scenario 1:
-Full-Blown QE3
-More Twist
-Extend Low-Rate Guidance

The pros say this kind of aggressive action will drag down the US dollar. That's a tailwind for the S&P broadly and benefits commodities and resource related trades.

“In this scenario, I’d go long ags and McDonald’s for reduced input costs,” says trader Joe Terranova, chief market strategist for Virtus.

Other Fast Money pros say materials , industrials , energy -- or other weak dollar trades -- would all benefit from this scenario.

Scenario 2:
-More Twist
-Extend Low-Rate Guidance

Extending Operation Twist is considered a moderate response from the Fed and the most likely outcome. It should benefit banks by keeping mortgage rates low. “In this scenario, I’d play banks tethered to the recovery in housing such as Wells Fargo and PNC,” says Terranova.

Scenario 3:
-Extend Low-Rate Guidance

Although the scenario looks dovish, pros consider this outcome the equivalent of a rate hike, simply because Operation Twist ends at the end of June. "Take this to mean the US is not falling off a cliff," says trader Tim Seymour, founder of EmergingMoney.com.

In this scenario, the pros say the way to play is with companies that generate all or most of their revenue from the US. “In this scenario, go long Dicks or Whole Foods,” says Joe Terranova.

Posted by CNBC's Lee Brodie

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Trader disclosure: On June 19, 2012 , the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Joe Terranova is long VRTS; Joe Terranova is long MCD; Joe Terranova is long PNC; Joe Terranova is long USB; Joe Terranova is long TCBI; Joe Terranova is long SBUX; Joe Terranova is long WMB; Joe Terranova is long SJM; Joe Terranova is long UPC; Joe Terranova is long WFM; Joe Terranova is long LPX; Joe Terranova is long SNDK; Joe Terranova is long IBM; Joe Terranova is long HYG; Joe Terranova is long AAPL; Joe Terranova is long EMC; Joe Terranova is long NXPI; Joe Terranova is long CNX; Karen Finerman is long AAPL; Karen Finerman is long BAC ; Karen Finerman is long JPM; Karen Finerman is long WMT; Karen Finerman is long TGT; Karen Finerman is long MSFT; Karen Finerman is long M; Karen Finerman is long CVS; Karen Finerman is short SPY; Karen Finerman is short IWM; Karen Finerman is short MDY; Tim Seymour is long BAC; Tim Seymour is long INTC; Tim Seymour is long SBUX; Tim Seymour is long MSFT; Brian Kelly is long AAPL; Brian Kelly is long BAC; Brian Kelly is long PNC; Brian Kelly is long JPM; Brian Kelly is long WFC; Brian Kelly is long MSFT; Brian Kelly is long AMAT

For David Pogue
Nothing to Disclose

For Drew Matus
Nothing to Disclose

For Caroline Levy
Neither analysts nor their household members/associates may have a financial interest in, or be an officer, director or advisory board member of companies covered by the analyst unless disclosed herein.
The analysts included herein hereby certify that the views expressed in this research report accurately reflect their own personal views about the securities and/or the issuers and that unless disclosure otherwise, no part of their compensation was, is, or will be directly or indirectly related to the specific recommendation or views contained in this research report or revenue from investment banking revenues.

The analyst(s) of this report hereby certify that the views expressed in this research report accurately reflect my/our own personal views about the securities and/or the issuers and that no part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendation or views contained in this research report.

For Dennis Gartman
Dennis Gartman is funds long CANADIAN DOLLARS
Dennis Gartman is funds long AUSTRALIAN DOLLARS
Dennis Gartman is funds long GOLD
Dennis Gartman is funds long S&P 500 INDEX
Dennis Gartman is funds long WHEAT
Dennis Gartman is funds short EURO
Dennis Gartman is funds short YEN
Dennis Gartman is funds short CORN

For Andy Barish
I, Andy Barish, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report: SBUX

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