TRIPLE DIGIT RALLY TO BEGIN WEEK
Both the Dow and S&P rallied on Monday as better-than-expected results from home improvement retailer, Lowe's helped spark broad-based buying on hopes the recession is easing and consumer spending is stabilizing.
Investors' optimism extended to sectors closely aligned with economic growth, including homebuilders, banks, energy companies and retailers.
Does the rally have legs?
Strategy Session with the Fast Money Traders
Monday’s trading felt kind of panicky to me, muses Jeff Macke. I’m deeply ambivalent about the move higher. I can’t help but ask myself how diluting shares of bank stocks is bullish.
Last week we took 5% off the index, that’s a pretty sizable move, counters Tim Seymour. Monday’s gains shouldn’t surprise you. Also, it seems to me a lot of investors are short so you’re seeing some covering.
I have my eye on tech, adds Pete Najarian. Cisco CEO John Chambers said his firm would continue expanding from network equipment to new businesses despite the current economic downturn. That sounds bullish.
VIX ABOUT TO BREAK BELOW 30
Technical traders are keeping a close eye on the Vix. On Friday the fear index hit an intraday low of 30.59.
Historically, when the VIX has crossed below and closed below 30, the S&P 500 has, on average, gone up 6% in the following 6 months.
It says to me that options investors are getting comfortable, muses Pete Najarian. But I’m nervous about that because I don’t know if investors should be comfortable with all the secondaries going on.
B OF A LEADS FINANCIAL RALLY
Shares of Bank of America were among the biggest boosts on the Dow, after Goldman Sachs upgraded the beleaguered bank to "buy" from "neutral" and added it to their Americas Conviction buy list.
Goldman analysts said the bank's capital-raising is about 50 percent complete, following last week's $7.3 billion sale of China Construction Bank Corp shares to investors.
Meanwhile, Rochdale Securities analyst Richard Bove noted the potential for "explosive earnings growth and unusually strong stock price performance" for banks as the economy recovers
He tells Fast Money, “if you take a look at the banks' balance sheets you can only come away thinking banks are overcapitalized, they have too much liquidity and reserves are much too high.”
OIL HITS 6-MO. HIGH
U.S. crude oil futures rose on Monday as unrest in Nigeria and a fire at a Sunoco Pennsylvania refinery pushed crude oil and products prices.
The crude futures price rise on Monday comes ahead of Tuesday's June contract expiration and after crude fell $2.28 on Friday on concerns about demand and economic recovery.
Keep in mind that oil is climbing on geo-political news and not demand, reminds Tim Seymour.
In the space, I think the play is fertilizer shares such as Agrium, muses Jeff Macke.
I’m keeping an eye on CF Industries, adds Pete Najarian. And upside call buying in Anadarko Petroleum suggests it could go higher.
TOPPING THE TAPE: LOWE’S LEADS CONSUMER STOCKS
Bullish comments from Lowe’s sparked optimism that the housing market had bottomed out.
"In recent weeks, we have seen consumer confidence improve, housing turnover show signs of a bottom in certain markets and home prices slow their decline," Chief Executive Robert Niblock said in a statement.
Although Lowe's posted a 22 percent drop in its first-quarter earnings, the results still beat Wall Street's forecasts and the company raised its full-year profit forecast.
I don’t know how to trade this, says Jeff Macke. Things are probably getting ‘less worse’ but that’s not the same as better.
I agree, adds Pete Najarian. This isn’t the time to pile in.
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Trader disclosure: On May 18th, 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 (AAPL), (BAC), (BX), (EEM), (FCX), (INFY), (PBR), (TTM); Macke Owns (AAPL), (WFC), (AGU), (GE), (SKF), (SDS); Finerman's Firm Owns (PBR), (RIG); Finerman's Firm Owns (BAC) Preferred; (WFC) Preferred; Finerman's Firm Is Short (BAC), (WFC); Najarian Owns (AMD) Calls; Najarian Owns (APC) CAll Spread; Najarian Owns (BBY) Put Spread; Najarian Owns (BP) Call Spread; Najarian Owns (BX) Calls; Najarian Owns (FAS) Call Spread; Najarian Owns (INTC) Calls; Najarian Owns (HPQ) Put Spread; Najarian Owns (MOS) Call Spread; Najarian OWns (XHB) Call Spread; Najarian Owns (XLB) Call Spread; Najarian Owns (XLU) Calls
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