Stocks rallied for the month of August but fell on Monday as concerns about the global economy weighed on Wall Street. Energy shares led the way lower after China's stock market dived nearly 7% to a three-month closing low, triggering a sharp sell off in commodities and natural resource companies.
Considering we’re heading into a time of year when stocks are traditionally soft, investors are increasingly becoming more worried about a pullback, especially since stocks have rallied about 50% from multi-year closing lows in March.
However, despite the day's lackluster performance, stocks made impressive gains on the month. For August the Dow is up 3.5 percent, the S&P 500 advanced 3.4 percent and Nasdaq gained 1.5 percent.
What should you make of it?
Strategy Session with the Fast Money Traders
I think the market is onto something, says Guy Adami. People talk about how China and the US market are not correlated but China takes commodities down and that takes energy down.
We’re probably at an inflection point in the market, says Fast Money trader Joe Terranova. We have ISM and employment numbers coming this week and that will be a “tell.” If we get good numbers and the market does not rally, that will say to me we’re looking at an October correction.
It seems like investors aren’t making a commitment to the market either higher or lower, muses Pete Najarian. We’re waiting for the next leg of leadership.
Don’t forget this week is historically a slow week for the market, reminds Karen Finerman. I have a lot of cash ready to be deployed and I think that’s true for a lot of other hedge funds. I’m cautious but I’ll also be out there buying.
What do you think? We want to know!
THE CHINA SYNDROME
U.S. crude oil futures ended below $70 a barrel Monday afternoon as a sharp fall in China’s market sparked concerns about the economic recovery and the price of commodities.
"Investors in the United States felt it was important for China to help lead the path to economic recovery," explains Bruce Bittles, chief investment strategist at Robert W. Baird. "If their markets are going to misbehave, it opens the question of whether they are going to see a recovery."
What’s the trade?
I’d move to the side in oil, counsels Joe Terranova.
I still think the OIH is heading to $98, counsels Guy Adami.
I wouldn’t chase stocks, counsels Pete Najarian. But I would look at resistance and support in Freeport and Nucor and create target areas for buying.
I’ll get interested in Transocean if it pulls back to $73, says Karen Finerman.
MORGAN STANLEY, CITI SINK BANKS
The XLF traded lower on Monday after Banc of America-Merrill Lynch cut its rating on Morgan Stanley to "neutral" from "buy" citing a shift to retail brokerages over institutional brokerages. The stock is no longer deeply undervalued, said research analyst Guy Moszkowski in a note to clients.
The sell off was amplified by a note in Barron's which said to take profits in Citigroup.
What’s the trade?
It seems that Morgan Stanley is trading in a range, says Pete Najarian.
Looking at the technicals, if Jefferies breaks above $24 it could spike to $29, says Guy Adami.
‘DASH FOR TRASH’ HITS THE SKIDS
Barron's also may have put an end – at least temporarily – to the dash for trash after it said AIG shares were overpriced after soaring more than 50 percent last week.
‘Dash For Trash’ Last Week
Fannie Mae +70%
Freddie Mac: +39%
‘Dash For Trash’ Monday
Fannie Mae -5%
Freddie Mac: -5%
What’s the play?
I would stay away from AIG on either side, says Karen Finerman. And quite frankly I’d add Citigroup to the “trash” list.
I also don’t see any point of trading a stock such as AIG when there’s so much uncertainty in this name, echoes Joe Terranova.
MICKEY, MEET THE HULK
One of the biggest media deals of the year just went down. On Monday Disney agreed buy Marvel for $4 billion in a deal that pays shareholders a 29 percent premium.
The agreement will add characters such as Iron Man, Spider-Man and the Fantastic Four to the entertainment empire built upon the success of Mickey, Minnie, Cinderella and more. This is Disney’s largest undertaking since it’s $7.6 billion purchase of Pixar in 2006.
What’s the trade?
In the space, I’d look at Dreamworks , counsels Guy Adami. It’s at a 52-week high but “today’s highs may be tomorrow’s lows.”
TOPPING THE TAPE: PHARMA BUCKS TOUGH TAPE
Merck and Astrazeneca were among the few gainers Monday. How should you trade pharma?
Astrazeneca has something like 140 drugs in the pipeline, says Pete Najarian. I think it has plenty of upside.
I think Johnson & Johnson deserves a higher valuation, adds Guy Adami.
BREAKING NEWS: YAHOO
Carl Icahn, one of Yahoo's largest stockholders, has sold 12.7 million shares to whittle his holdings in the slumping Internet company to a 4.5 percent stake.
The sales occurred in the stock market's last three trading sessions, according to a Monday filing with federal regulators.
Karen Finerman reminds viewers that since his share is now less than 5% he doesn't have to reveal his position in a 13-F filing.
PROTECTING PROFITS IN A DOWNTURN
September is typically the biggest losing month of the year, with the Dow declining 1.2% on average. How should you position yourself for the days ahead?
Perhaps you should be long. OptionMonster Jon Najarian doesn't think the market is going lower. Monday's action in Goldman Sachs is bullish, he says. And investors are misreading events in China.
What does Jon Najarian see that so many others are missing? Check out our entire interview in this video.
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Trader disclosure: On Aug 31st, 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); Terranova Owns (AMZN), (FCX), (JPM), (SU), (WFT); Terranova Is Short (SHLD); Terranova Is Short (ESS); Terranova Owns (CCL) Puts; Terranova Works For (VRTS); Finerman Owns (PDE); Finerman Owns (RIG); Finerman's Firm Owns (BAC) Preferred Shares, Finerman Owns (BAC) Preferred Shares And Owns (BAC); Finerman's Firm Owns (WFC) Preferred Shares And Is Short (WFC), Finerman Owns (WFC) Preferred Shares ; Finerman's Firm Owns (MSFT), (NOK), (WMT), (PBR), (PDE), (RIG), (TBT); Finerman's Firm Is Short (USO), (IYR), (IJR), (MDY), (IWM); Najarian Owns (BAC) & Short (BAC) Calls ; Najarian Owns (BUCY) & Short (BUCY) Calls; Najarian Owns (HGSI) Call Spread; Najarian Owns (FCX), Owns (FCX) Put, Is Short (FCX) Calls; Najarian Owns (JPM) & Is Short (JPM) Calls ; Najarian Owns (MS) And Is Short (MS) Call; Najarian Owns (MSFT) And Is Short (MSFT) Call; Najarian Owns (PALM) Calls; Najarian Owns (TXT) Call Spread; Najarian Owns (TEVA) Calls; Najarian Owns (C) & Short (V) Calls; Najarian Owns (WFT) Call Spread; Najarian Owns (YHOO) Call Spread; Najarian Owns (ETFC) Calls
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