DOW PLUNGES ON CREDIT CRUNCH:
The headline: Dow Unravels For Near 400 Point Loss as Bad Home Loan Woes Spread...French Bank BNP Paribas Sparked the Selloff in Morning After Suspending Three Funds With Bad U.S. Securities...
The main problem is transparency, Eric Bolling says. Last week, BNP said its “exposure to subprime is insignificant.” In a market like this one, where rumors can cause huge swings, “transparency is way more important than anything else,” Eric said. The liquidation of risky assets should actually be a good thing for the market, but the reason this news isn’t being taken in stride is because of how opaquely it is presented. As a trade, Eric said, the last thing he wants is to be surprised.
If you’re looking for the bright side, Eric recommends going back and looking at some stocks that were once expensive and have now become cheap. Not all stocks are broken even if the market seems to be breaking down.
Guy Adami thinks from a technical standpoint, we do indeed have a broken down market. But that doesn’t mean you can’t make money. A correction is OK, he says. “The market needs this.” Guy Adami would continue to buy Hewlett-Packard (HPQ). “There’s something good going on” in HPQ, he says.
Jeff Macke is the most anxious of the group: “I don’t think anyone makes money in a market like this.”
But the Financial Sector ETF (XLF) is still 5% higher than it was off Monday’s lows, so all hope is not lost, Pete Najarian says. “Every day is a new day in this market,” he says. The good stocks are still worth holding onto. He has a put position in Goldman Sachs which provides him an element of safety, but he also likes stocks like Coca-Cola (KO) which seems to be holding water even on a terrible day like today.
A CUT-RATE MARKET:
The headline: Fed Stabilized Market Today By Injecting More Liquidity Into Banking System – Will It Go Even Further And Cut Interest Rates This Year?
Many futures traders are now effectively pricing in a Fed rate cut before the September meeting. If the Fed were to do this, the U.S. dollar would get “obliterated,” Guy Adami says. It’s a bad idea, but if it materialized he would get long gold to hedge against the dollar.
The real danger of a Fed cut here is that the dollar would indeed collapse and that would bring the market down, Jeff Macke says.
A cut might prove necessary in the September meeting, but it isn’t necessary today, Pete Najarian says. Freddie Mac (FRE) and Fannie Mae (FNM) are providing enough liquidity for now, he says.
HOME DEPOT WRECKED:
The headline:Home Depot (HD) Tumbles After Saying It May Cut Deal Price For Supply Unit; A Private Equity Consortium Had Agreed To Buy HD Supply For $10.3B; HD Also Lowers Amount It Will Pay For Buyback
Eric Bolling had been recommending Home Depot on the heels of a potentially active hurricane season. Now that the new predictions are calling for fewer hurricanes heading into the back half of the season, Eric is out of HD.
Jeff Macke, another one-time buyer of Home Depot would avoid it now at all costs. The news about the deal for its supply unit is a disaster for the company and was even a factor in today’s broader sell-off, he says.
AFTER-HOURS ACTION: NVIDIA
The headline:NVIDIA (NVDA) Jumps After-Hours As Earnings Top Estimates
NVDA seems to go up whenever the market goes down, Guy Adami says: “something clearly is in play here.” He thinks the stock has gotten a little ahead of itself but it still is worth owning on any dip.
IN THE SHADE OF CYPRESS:
The headline:Cypress Semiconductor (CY) Jumps After Activist Investor Daniel Loeb Increases Stake; SunPower (SPWR) Among Today’s Better Performers
CY owns a big stake of SPWR which explains why the two seem to be running in lockstep, Pete Najarian says. “In a terrible tape this stock (CY) was up 3% today.”
WATER, WATER EVERYWHERE:
The headline:Flowserve (FLS) Posts 91% Profit Surge But Shares Still Fall In Sell-off
Eric Bolling and Guy Adami still like Flowserve. “The water trade is on,” Eric says. He also recommends Edison International (EIX) and SJW Corp. (SJW) which both have exposure in Southern California.
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Trader disclosure: On Aug 9 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders: Macke Owns (JWN), (INTC); Najarian Owns (GS), (AMSC); Bolling Owns (T), (BP), Gold, Silver; Bolling Owns Japanese Yen Futures