Stocks Higher For 4th Straight Day
There’s no keeping this market down. The S&P 500 recorded another day of gains; the current four-day advance is now the index's longest winning streak since early April.
However, trading was volatile, with indexes swinging between gains and losses during the session.
The Dow industrials briefly turned positive for the year, rising as high as 8,787.13, before trimming gains.
And the broader market came up against critical resistance a day after the S&P 500 hit a key technical milestone, finishing above its 200-day moving average for the first time since December 2007.
Will momentum take stocks higher or is a correction imminent?
It seems to me this market is all about asset allocation and money flow, muses Joe Terranova. We’re seeing funds coming into the market because underperformers are doing well. But be careful, some of the market leaders such as financials, energy and materials are starting to roll over.
I think we’re in a nice little zone right here, muses Tim Seymour, that is until we get second quarter earnings numbers which could be disappointing. That could be the catalyst that sends stocks lower.
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FINANCIALS FALL ON MORE SHARE SALES
Bank stocks tempered broad market gains as investors sold off the sector on worries about the dilutive impact of recent stock offerings.
JP Morgan was among the top drags as they raised $5 billion in new capital from a secondary offering – a requirement to rid themselves from tight regulations stemming from TARP.
Preparing for TARP Payback
TARP Funds Total Common
Received Equity Raised
Bank of America $45 $25.9
Citigroup $45 $58
JP Morgan $25 $5.0
Morgan Stanley $10 $6.8
Goldman Sachs $10 $5.8
Source: Jeffery Harte, Sandler O'Neill
I know JPMorgan's $5 billion capital raise sounds like a lot of money, but it's really not a lot of money at all, explains Karen Finerman. It's really a small amount of their outstanding shares and I think the weakness is an opportunity to get in.
If you’re trading JP Morgan the secondary sets up a nice trade, adds Guy Adami. If you’re a bear I’d stop out above $35.35, he counsels and if you’re a bull I’d be a buyer above $35.25.
It seems to me the question in banks is… how fast can they get back to normalized earnings, muses Joe Terranova. And I’m not sure it's the same for all the big banks. I'm not certain how fast Bank of America can get there.
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AFTER HOURS ACTION: AETNA
Health insurer Aetna cut its 2009 forecast on Tuesday, citing higher projected medical costs for its commercial business serving employers and lower revenue from its Medicare plans for seniors.
Aetna shares tumbled as much as 7 percent after hours.
I think the space is cheap on a relative basis, muses Karen Finerman, but the X factor is the Obama administration and what they’re going to do in the healthcare space going forward.
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AFTER HOURS ACTION: JETBLU
Shares of JetBlue fell more than 6 percent in extended trading on Tuesday after the airline announced the proposed offering of 20 million shares of common stock.
If you’re bearish crude, I think the trade is getting long JetBlue around the secondary price.
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TOPPING THE TAPE: CONSUMER SHARES
An upbeat report on sales of previously owned U.S. homes bolstered hopes for an economic recovery and sent consumer shares higher.
An index of pending sales of previously owned U.S. homes shot up 6.7 percent in April, the biggest monthly gain in 7-1/2 years, according to the National Association of Realtors.
I think the trade is long Mastercard if it pulls back to $150, says Guy Adami.
I’m short the SPDR S&P Retail , reveals Karen Finerman, but so far that hasn’t worked at all.
I would not be a buyer of most consumer names, says Joe Terranova. In fact I’d be looking to get short.
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BULL MARKET OR BS?
Considering all the recent market moves is this rally a bull market or just BS?
I’m bullish on trades that are highly levered to the US economy such as timber futures says Brian Kelly of Kanundrum Research.
That's because of strong pending home sales numbers and other impressive numbers out of the housing sector.
And if you don’t want to game timber you can play it with companies Plum Creek , Rayonier and Weyerhauser.
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OIL REBOUNDS LATE IN DAY
U.S. crude oil futures ended lower on Tuesday as traders took profits after a six-day rally that had boosted prices more than 12 percent.
Losses were limited, however, as better-than-expected U.S. pending home sales data for April reinforced hopes the recession is easing, boosting momentum for energy bulls.
With oil now trading at $68 I think we have contango coming back into the market, muses Guy Adami. I’d take profits.
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FAST FX: DOLLAR POUNDED AGAIN
A drop in the U.S. dollar against major foreign currencies also buoyed the shares of multinational companies. The dollar hit fresh lows against the euro on Tuesday as strong housing data weakened its safe-haven appeal.
Commodity based currencies such as the Australian dollar or the Canadian dollar should outperform, speculates Tim Seymour.
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SECTOR TRADE: TECH A FAVORITE ON THE FLOOR
It appears investors are smitten with tech . The sector is the 2nd best performing sector this year behind materials perhaps because of the flurry of deals going down in the sector.
How should you play it?
In the tech space our top pick is RIMM , reveals Citigroup tech analyst Jim Suva.
*To hear more from Jim Suva including his thoughts on Nokia, Motorola and more check out the video below. You'll find our conversation with Suva toward the end of the clip.
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Trader disclosure: On June 2nd, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Seymour Owns (GA), (TTM), (AAPL), (FCX), (FXI), (EEM), (RIMM), (NOK), (MGM), (INFY), (FCX); Finerman's Firm And Finerman Own (BAC) Preferred Shares And Are Short (BAC); Finerman's Firm And Finerman Own (WFC) Preferred Shares, Finerman's Firm Is Short (WFC); Finerman Owns (TBT); Finerman's Firm Owns (TBT), (RIG), (MRO); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO), (XRT)
Terranova Owns (FCX), (TER), (ABI), (XBI); Terranova Owns (POT) & (POT) Calls; Terranova Owns (JPM) & (JPM) Calls; Terranova Owns (BTU) & (BTU) Calls; Terranova Owns (RIMM) & (RIMM) Calls ; Terranova Owns (GENZ) & (GENZ) Calls; Terranova Owns (MS) & (MS) Calls; Terranova Owns (IBM) & (IBM) Calls; Terranova Is Short July Oil Futures; Terranova Is Short August Oil Futures; Terranova Is Short September Oil Futures; Terranova Owns December Oil Futures; Terranova Owns December 2010 Oil Futures; Terranova Is Short August Gold Futures; Terranova Is Short August Nat Gas Futures; Terranova Is Short July Nat Gas Futures; Terranova Owns December Nat Gas Futures; Terranova Owns (X) & (X) Calls; Terranova Owns (BRCM) & (BRCM) Calls; Terranova Owns (JOYG) & (JOYG) Calls; Terranova Owns (DIS) Call Spread
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