DOW TEETERING ON NEW 5-YEAR LOW
The Dow eked out a gain on Wednesday which kept the index from breaking through the November 20 bear market low however President Obama's $275 billion plan to prop up the housing market failed to stem worries about the economy, and bleak housing data highlighted the deepening recession.
All 3 major indexes see-sawed in a narrow range throughout the day, but the S&P and Nasdaq ultimately failed to hold gains despite bargain-hunting that sent investors to the perceived safety of defensive stocks, such as technology and consumer staples.
Adding to the somber mood, the Federal Reserve slashed its economic forecast for 2009 and several companies, including Deere posted dismal results. Deere fell almost 4 percent.
Strategy Session with the Fast Money Traders
The only trade right now that’s working is longgold , says Joe Terranova. What else can you do?
The GLD trust is now the 7th largest holder of gold in the world, adds Tim Seymour. That’s amazing.
I’m long gold and I like the trade, adds Pete Najarian. And I think the GDX will catch up to the GLD.
Unless you have stops and puts on the gold trade, you will likely lose money, says Guy Adami. The gold market is very volatile and eventually everyone will want out.
On Wednesday the White House unveiled its new plan to help homeowners on the brink. The plan is fairly complex but following are the main elements.
- a $75 billion fund would subsidize homeowners struggling to pay their mortgages.
- housing finance companies Fannie Mae and Freddie Mac may invest a further $100 billion in mortgages to mop up more home loans and spur fresh lending.
- Washington may inject a further $100 billion into each of the mortgage giants, protecting them against losses as they expand their massive reach into the housing market.
I don’t know that this plan solves the main issue, which is home prices moving rapidly lower, muses Joe Terranova.
I think it’s a net positive, counters Tim Seymour. Anything that keeps people in their homes is net positive.
FINANCIALS LOWER ON THE NATIONALIZATION DRUMBEAT
It’s tough to be a bank these days. Citigroup and Bank of America led the sector lower after the Financial Times reported that nationalization is starting to gain acceptance among the GOP.
One of the biggest surprises in the call for nationalization comes from GOP Sen. Lindsey Graham. (Click here to to read more about Graham's banking solutions.) Others touting bank nationalization as an option, include Alan Greenspan, the former Federal Reserve chairman.
I think nationalization would provide a floor, says Guy Adami. And then the healing could begin.
Meanwhile shares of Wells Fargo slipped to their lowest level in almost 12 years before recovering amid fears the fourth-largest U.S. bank could cut its dividend and post higher losses after its purchase of Wachovia.
Wells Fargo had been trading at a premium to their book, explains Pete Najarian, because the perception was that they had sidestepped the subprime mess. But maybe they didn't, he speculates.
I think it's their exposure to consumer credit that dragged the stock down on Wednesday, counters Joe Terranova.
AFTER HOURS ACTION: HEWLETT PACKARD
Hewlett-Packard reported worse-than-expected quarterly revenues and issued an earnings forecast for the current quarter that was below Wall Street's expectations. After hours the stock was down as much as 4%.
Investors are concerned about their forecast, explains Pete Najarian. But I like how much revenue they added on the service side. Personally, I like their full year forecast and I’d add to my position on the dip.
I’m cautious, counters Tim Seymour. A lot of their revenue comes from overseas.
It’s not a surprise that they had a revenue miss, adds Guy Adami. But I think they’re running their business better.
WHALE WATCHING: GEORGE SOROS
George Soros is now the latest Wall Street whale to report quarterly holdings. Most notably he’s almost doubled his stakes in Potash and Petrobras .
I think you can follow Soros into these stocks, says Joe Terranova, but not right away. The whole space is still too fragile.
I would wait for a big dip before getting into Potash, counsels Guy Adami.
Potash itself is a nitrogen based fertizlier and there are only 7 or 8 suppliers in the world, explains Tim Seumour. Heading into the spring there should be tremendous demand for the commodity.
If the fertilizer names are taking off I’d go upstream to the seed names like Monsanto , counsels Pete Najarian.
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Trader disclosure: On Feb. 18th, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (BAC), (EEM), (EEM), (PBR), (XOM), (FXI); Seymour's Firm Owns (VIP); Terranova Owns (FCX), (XBI), (AMGN), (KCE), (DIS); Terranova Owns (IBM) & (IBM) Call Spread; Terranova Owns (AMGN) Puts; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Najarian Owns (CHK) Put Spread, Najarian Owns (CBS) Calls, Najarian Owns (EEM) Call Spread, Najarian Owns (FCX) & (FCX) Calls, Najarian Owns (GS) Calls, Najarian Owns (GDX) Call Spread, Najarian Owns (GLD) Call Spread, Najarian Owns (HPQ) Spread, Najarian Owns (MSFT) & (MSFT) Short Calls, Najarian Owns (MS) & (MS) Short Calls, Najarian Owns (MOS) Call Spread, Najarian Owns (STI) Call Spread, Najarian Owns (WFC) & (WFC) Calls
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