DOW FALLS A FIFTH DAY
The Dow fell for the fifth straight day on Tuesday as investors fretted over what many expect will be a gloomy earnings season.
However, both the S&P 500 and Nasdaq ended higher as rising oil prices lifted energy shares and biotechnology companies gained as investors bet they will be among the few sectors with growing earnings.
The financial sector , at the heart of the credit crunch and global economic slowdown, received a boost after Federal Reserve Chairman Ben Bernanke said in a speech in London that more steps were needed to stabilize banks, reviving the idea of authorities sopping up toxic assets from banks' books.
Also, optimism that Washington would work quickly on a plea by U.S. President-elect Barack Obama for the remaining $350 billion of financial rescue funds to stabilize credit markets helped offset some of the gloom, as did news the U.S. trade deficit had its biggest contraction in 12 years in November.
BERNANKE: MORE CAPITAL INJECTIONS MAY BE NEEDED
As we mentioned above Federal Reserve Chairman Ben Bernanke said on Tuesday that fiscal stimulus alone would not be enough to rescue banks.
Bernanke went on to say the government should consider buying troubled assets, providing asset guarantees or setting up a so-called bad bank to take over assets in exchange for cash and equity.
It seems to me they’ve come full circle, says Karen Finerman. But I don’t know if $350 billion pails as compared to the amount of bad assets out there.
I like that they’re going to be buying bad assets, adds Tim Seymour.
CITI: CLEAN-UP AISLE 3
Citigroup has agreed to merge its Smith Barney brokerage unit into Morgan Stanley's brokerage operations, the first step in ultimately shedding Smith Barney and move away from the financial supermarket model that Citigroup has followed for the past decade.
The deal would provide a capital boost for Citigroup, but it will also be the first step toward the break up of the massive investment bank, which is under pressure to raise capital to stem losses. Citigroup is expected to announce another massive loss for its fourth quarter.
It seems to me that Citigroup CEO Vikram Pandit was forced into this, muses Guy Adami. Remember he said he'd never sell Smith Barney.
He didn't sell it. He gave it away, adds Karen Finerman with a chuckle.
But can Citi be in a desperate situation without dragging the entire financial sector along, asks Dylan Ratigan.
It could get us into a downward cycle, muses Finerman.
GE DRAGS DOWN THE DOW
Shares of General Electric fell sharply on Tuesday, after an analyst said the firm’s profit could rely more heavily on tax benefits than Wall Street expects.
Barclays Capital analyst Robert Cornell wrote in a note to clients that "although a negative tax rate may be in expectations, we aren't sure if the Street is prepared for a contribution of this magnitude."
52% of their earnings comes from their financial arm, explains Guy Adami. In the space I’d look at Honeywell which is a true industrial company.
Speaking of financials... I’d keep en eye on HSBC , warns Pete Najarian. Institutional investors are signaling that there could be trouble ahead with the stock.
Financials are not that far off their long-term lows, adds Karen Finerman. I’m watching Bank of America .
Goldman is trading around $78, adds Guy Adami. It could be a good point to get into this name.
OPTIONS ACTION: CALL-BUYING IN BIG CABLE NAME
Pete Najarian is seeing unusual options action in Comcast .
The volume in the Comcast Feb. $17.50 calls suggests to Pete Najarian that this stock could soon go higher.
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Trader disclosure: On Jan 13, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Najarian Owns (CSCO) Stock; Najarian Owns (CSCO) Short Calls; Najarian Owns (MSFT) Stock; Najarian Owns (MSFT) Short Calls; Najarian Owns (DNA) Calls; Najarian Owns (XME) Calls; Najarian Owns (NVLS) Calls; Najarian Own (NVDA) Calls; Najarian Owns (MS); Najarian Owns (MS) Short Calls; Najarian Owns (MS) Put Spread; Adami Owns (AGU), (C), (BTU), (GS), (INTC), (MSFT), (NUE); Seymour Owns (BAC), (EEM), (F), (INFY), (EDC); Seymour's Firm is Short (PBR); Finerman's Firm Owns (AEO), (MSFT), (DNA); Finerman's Firm Owns (MSFT) Put Spreads; Finerman's Firm Owns (DNA) call spreads; Finerman's Firm Is Short (IYR), (IJR), (IWM), (MDY), (SPY), (USO), (ANF), (DSX)
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