The Dow and S&P 500 closed lower Friday, as sliding crude oil prices prompted selling in the energy sector and traders cashed in some of their gains in the financials .
A report showing consumer sentiment had snapped higher sparked some optimism early in the session, but the rally was short-lived.
By the end of trading two stocks fell on the NYSE for everyone that rose. And for the week, the Dow fell 3.6 percent, the S&P 500 index lost 5 percent and the Nasdaq slid 3.4 percent.
How should you be positioned?
Strategy Session with the Fast Money Traders
I still think the S&P 500 is setting up for a move lower, says Guy Adami. The path of least resistance is lower.
I don’t agree, counters Tim Seymour. It seems to me Wall Street is under-invested.
I think you have to look at the pullback in the context of the run we’ve had since March 9th, adds Karen Finerman. I think the recent pullback is insignificant when compared to the move to the upside. And it doesn’t surprise me that the leaders on the way up would be the laggards on the way down.
It seems to me that 883 may be a level of support in the S&P, muses Pete Najarian. Now we’re finding ourselves in a no-mans land.
Profit taking dominated the financials with investors cashing out after a huge run-up over the last two months. Also the spate of secondaries recently announced in the sector sparked concerns of dillution.
Speaking of secondaries, I think Wells Fargo will retrace and go back to $22, says Guy Adami. The trade is wait for lower.
I agree that Wells Fargo has room to the downside, adds Pete Najarian. Since options expired on Friday a number of protective puts are now gone.
In the space, I’m bullish on Barclays, adds Tim Seymour. They’ve winning marketshare.
Meanwhile CNBC’s Charlie Gasparino reports that JP Morgan and Goldman Sachs may receive government permission as early as next week to pay back the billions in TARP money they received last fall.
I think that news is already baked into the stocks, muses Karen Finerman. I don’t see any trade on Gasparino’s news.
From what I can tell, the next $10 - $15 move in Goldman looks to be lower, adds Guy Adami.
INSURERS DOWN AFTER TARP APPROVAL
Shares of several life insurers including The Hartford and LincolnFinancial pared gains after popping on news they had received a preliminary green light to participate in TARP.
There’s been a lot of speculation that stocks would pop on this kind of move, explains Pete Najarian. It wasn’t completely unexpected.
But there’s was an unusually large volume of options action in the space yesterday and now the smart money is already out. That seems suspicious to me. It suggests some of the news was leaked.
Yesterday 30-Day Avg.
Lincoln Nat'l 21,000 5,500
Prudential 8,500 6,500
Hartford 114,000 21,100
Principal Financial 8,700 1,600
When the government backs these guys it’s a credit story not an equity story, muses Tim Seymour. It’s the CDS that should move not the stock price.
RETAIL IN A RUT?
New data shows consumer confidence snapped to its highest level since last September, before the failure of Lehman Brothers. The positive sentiment stems from expectations the economy may be in the last stages of the recession, says the Reuters/University of Michigan Surveys of Consumers.
However, JC Penney warned Friday that it expects consumer spending to stay weak and the department store forecast second-quarter and full year results below Wall Street's expectations.
How should you be trading?
It seems to me that margins are improving at some retailers, says Guy Adami. I wouldn’t jump in now, but I like Gap at $14. Also I think Nordstrom is a buy on a pullback.
I’d look at Wal-Mart, adds Pete Najarian. I think the stock is cheap around $48.
I was buying Wal-Mart all week against the SPDR S&P Retail ETF, adds Karen Finerman. I like being in companies like Wal-Mart, Kraft and P&G.
OIL BREAKOUT FAILS
U.S. crude oil futures ended sharply lower Friday largely due to renewed worries that a global economic recovery may be far off. This week, energy traders were faced with lower oil demand forecasts from OPEC, the International Energy Agency and the U.S. Energy Information Administration.
Bullish data came out on Wednesday and oil went lower, reveals Guy Adami. That’s a huge tell. I think the next $8-$10 is lower.
I think that’s good news, adds Tim Seymour. It suggests stabilization. I’d look at oil services names such as Baker Hughes .
I’m long Transocean, adds Karen Finerman.
ANALYZE THIS: GOOGLE
Shares of Google charged higher on Friday sending the Internet search giant up 27% since the beginning of the year. Jefferies analyst Youssef Squali maintained his buy rating on this stock with a $442 price target.
He tells Fast Money he’s bullish on Google because of how much traffic they get – and how they can monetize that traffic. Search is up 45% and if they can maintain that kind of growth it translates into more paid clicks.
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Trader disclosure: On May 15th, 2009, 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 (DRYS), (RIMM), (RIG), (TSL), (F), (AAPL), (BAC), (BX), (EEM), (FXI), (TSL); Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Finerman's Firm Owns (PBR), (RIG); Finerman's Firm Owns (BAC) Preferred, (WFC) Preferred; Finerman's Firm Is Short (XRT), (BAC), (WFC); Najarian Owns (CELG); Najarian Owns (AMD) Calls; Najarian Owns (BX) Calls; Najarian Owns (INTC) Calls; Najarian Owns (MOS) Call Spread; Najarian Owns (XHB) Call Spread; Najarian Owns (XLB) Call Spread; Najarian Owns (XLU) Calls
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