MARKET ENDS WHIPLASH DAY LOWER
The Dow closed lower on Wednesday after President Obama warned of stricter oversight for Wall Street, raising the specter of greater regulation that investors fear could sap profits.
Obama's comments near the market close rattled investors however not every Dow component was punished.
In fact Bank of America soared on Wednesday largely due to comments from CEO Kenneth Lewis who said his bank does not need more federal aid and is in better shape than most rivals, even as "rumors, innuendo and falsehoods" cause its stock to fall.
Most bank stocks closed in positive territory on Wednesday as you can see from the KBW Bank Index of larger lenders. Investors sentiment was buoyed by Fed Chariman Ben Bernanke who again dismissed speculation that the government may nationalize big banks.
Meanwhile CNBC has learned the "stress test" program on banks with more than $100 billion in assets will be completed by no later than April. The tests will help regulators decide whether the banks have sufficient capital -- and the right mix of it -- to withstand any additional shocks to the economy over the next two years.
Strategy Session with the Fast Money Traders
I don’t entirely get this stress test, muses Karen Finerman. Details are missing but I do like what they’re trying to do. They’re trying to tell the market we’re on top of this.
If someone is having a heart attack you don’t put them on a treadmill to give them a stress test, bristles Jeff Macke. Banks are on the table. This is nothing but an effort to buy time.
There’s been a market attitude of “government do something” and then government does something and the market complains about the results, adds Zach Karabell. This at least begins to create some quantitative framework.
If you're looking for a trade, I think some of the regional banks that have been dragged down along the way have been unduly punished, says Pete Najarian. For example look at a bank of SunTrust . Some banks were probably unjustly hit because they don’t have so much exposure to these toxic assets.
TOPPING THE TAPE: APPLE LEADS TECH
Apple led tech shares higher after the firm’s executives said CEO Steve Jobs remains deeply involved in company decisions despite ceding control over operations.
They reelected the same board, explains Pete Najarian. Investors are putting their money behind the same people.
I think the board still stinks it’s just the stock is behaving better, bristles Jeff Macke. From here I like the stock but it has a flawed communication structure.
For the sector it’s big picture positive, says Zach Karabell. Numerous big cap names in this sector have huge cash reserves.
OIL SOARS 6%
Oil prices jumped 6 percent to above $42 a barrel on Wednesday, after a U.S. government report showed a sharp drop in gasoline inventories in the world's top consumer.
The best name in this sector is Exxon Mobil, muses Pete Najarian.
Exxon does nothing for me, exclaims Jeff Macke. Oil surged on Wednesday and this stock did nothing. I don’t know why you’d want to own this stock.
At $15 a barrel lot of producers break even, explains Zach Karabell. So even at $40, which might seem low after last year's run, the industry will be generating a lot of revenue. I’d look at Petrobras which has huge reserves.
CREDIT IMPROVING: BIG ROCHE BOND DEAL
Swiss drugmaker Roche is set to raise more than $14 billion in the euro and sterling bond market and now has almost three-quarters of the financing it needs for its $42 billion hostile offer for Genentech .
The four-part bond, denominated in euros and sterling, drew demand of more than $33 billion and comes just a week after the company raised a record $16 billion in the U.S. bond market.
I think they bump their bid for Genentech, says Karen Finerman and I think it happens soon.
I bought Genentech calls today, adds Pete Najarian. I’m convinced that Genentech gets more than $89.
WYNN LEADS DROP IN RESORT SHARES
Casino operators Wynn Resorts and Melco Crown Entertainment on Tuesday reported fourth-quarter losses as the recession hurt business in Macau and Las Vegas.
The loss at Macau casino developer Melco was not as large as some analysts expected, while results at Las Vegas-based Wynn fell far short of Wall Street estimates.
We know it’s bad, but apparently it’s worse, says Jeff Macke. And that’s not reflected in these stocks.
And Wynn has a great deal of debt, reminds Zach Karabell. It’s more about that than the drop off in business.
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Trader disclosure: On Feb. 25th, 2008, 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 (GE) Put Spread; Najarian Owns (DNA) Calls; Najarian Owns (FCX) & (FCX) Calls; Najarian Owns (GDX) & (GDX) Short Calls; Najarian Owns (HPQ) Calls; Najarian Owns (MSFT); Najarian Owns (MS) & (MS) Short Calls; Najarian Owns (X) Put Spread; Najarian Owns (WFC) & (WFC) Calls; Karabell Owns (AAPL), (BHP), (FCX), (GOOG), (GLD), (JPM); Macke Owns (MS), (TM), (SDS), (DIS); Finerman Owns (RIG), (DAI); Finerman's Firm Owns (DNA), (MSFT), (RIG); Finerman's Firm Is Short (IYR), (IJR), (IWM), (MDY), (SPY), (USO); Finerman's Firm Is Short (BBT); Finerman's Firm Owns (WFC) Preferred
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