A day after the Dow set a new record, stocks were stuck in the mud. The bull market’s best friends – commodity stocks linked to global growth – rolled over. Are we stuck in neutral for the rest of the year or was Tuesday just a pause to refresh?
STUCK AT 14,000?:
The headline: Market Goes Nowhere a Day After Dow Sets New Record Above 14,000; S&P 500 Little Changed Today as Falling Commodity Stocks Met Rising Bank Stocks; Tech-Heavy Nasdaq Jumped to 6 ½ Year High
COMMODITY STOCKS OFF CLIFF:
The headline: Commodity Stocks Lead Market Lower as Gold Drops Most Since August, Oil Falls to $80
Tuesday marked the first day in a long time that the U.S. dollar showed some strength, Jeff Macke says. And the weak dollar has been good for stocks so the correlation between a stronger dollar and weaker equities makes sense.
The deal involving Toronto-Dominion Bank buying Commerce Bank (CBH) for $8.5 billion exemplifies a foreign buyer taking advantage of a weak dollar, Karen Finerman says.
Guy Adami says it is time to take profits in oil names like ExxonMobil (XOM). “I think you’ll get them cheaper.”
BANKS, BROKERS BREAKING OUT:
The headline:Morgan Stanley (MS) & Bank of America (BAC) Move Higher on More “Credit Crisis is Over” Speculation
Even though the fundamentals aren’t great, investors should not short the financials, Jeff Macke says. The short-term catalyst is gone after the rate cut and shorts are just going to get hurt.
Guy Adami recommends getting ahead of U.S. Bancorp (USB) before its earnings. The bank has a conservative management that has stayed relatively out of the subprime mess and could be rewarded for it when it reports.
WHEN THERE’S BLOOD IN THE STREET:
The headline: Homebuilding Stocks Surge Even as Pending Homes Sales Fall to Worst Level Ever
The housing industry is “horrible,” Guy Adami says. But that doesn’t mean all housing stocks can’t be used as trading vehicles. In fact, most of them can. He likes KB Home (KBH) as a trade with more upside, but he would stop out at or below $24.50.
Tuesday’s pending home sales number was “horrific,” Karen Finerman says, but the stocks rallied on hopes of a market bottom. Just be careful and take some off the table, she advises.
CHINA VACATION DAY 2:
The headline: China ETF (FXI) Surges Another 2% on Day 2 of Week-Long China Holiday
Just because China is closed doesn’t mean U.S. investors can’t invest in those stocks from here, Pete Najarian says. “That’s the beauty of the ADR world.” He still sees upside in China from stocks like Baidu.com (BIDU), up 12% Tuesday, to casino trades like Wynn (WYNN) and Las Vegas Sands (LVS) on the back of Macau.
MU-VING TO A LOSS:
The headline: Micron (MU) Falls After Hours on $158 Million Q4 Loss
Pete Najarian thinks the run in Micron has come and gone. MU has to “crush” earnings for the stock to move. Stick with Sandisk (SNDK) or Rambus (RMBS) which have more performance upside, he says.
Guy Adami thinks MU still goes higher.
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Trader disclosure: On Oct 2, 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 (ATVI), (EMC); Najarian Owns (BIDU), (UA), (PDLI); Najarian Owns (GS) Options; Finerman Owns (GS); Finerman's Firm Owns (DAI), (LEN), (NVT), (NMX), (NYX), (KSS); Finerman's Firm Owns S&P 500 Puts; Finerman's Firm Owns Russell 2000 Puts