Both the Dow and S&P closed higher on Thursday ending a four-day losing streak after stronger-than-expected retail data boosted economic recovery hopes.
The positive momentum also stemmed from a reluctance to be short over the 3-day Labor Day weekend, which is quickly approaching.
The financials were among the best performers of the day as Citigroup and Bank of America led the sector higher.
Now bullish investors are eagerly anticipating Friday’s jobs report, which comes out at 8:30am Friday morning, hoping to see a decline in layoffs and other signs that the labor market is healing.
How should you be positioned?
Strategy Session with the Fast Money traders
I don’t think that very many people are fearful of the jobs numbers, says Joe Terranova. There was a lot of late-day buying which suggests people on the Street think unemployment could surprise to the upside. I’d get long the financials on a better than expected jobs number.
I hate to be Debbie downer but Intel and IBM were weak on Thursday, says Guy Adami. They were leaders and the recent price action scares me.
But the other market ‘tell’ is Goldman, adds Pete Najarian. And that performed quite well.
RETAILERS POST BETTER THAN EXPECTED RESULTS
Shoppers aren’t spending freely but the latest same-store sales data suggests the holiday season could be less dismal than feared.
On average, same-store sales fell 2.9 percent at the 30 retailers tracked by Thomson Reuters, better than the 3.8 percent decline analysts had forecast.
Despite the weakness, many low priced stores such as Target and TJMaxx did better than expected as cash strapped consumers continue to hunt for bargains.
"It does seem like the consumer is willing to spend if given a great deal," says Carl Steidtmann, an economist at Deloitte Research. "That reflects a consumer that is slowly coming out of their bunker."
What’s the trade?
I’m watching Abercrombie & Fitch and Dillard’s , says Pete Najarian. The bar was set low yet they failed to impress me.
I just can’t get excited about Q4 in retail, adds Tim Seymour. Compared to next year the numbers may be strong but remember last year was terrible.
It seems to me that retailers are working off inventories, adds Joe Terranova. I think the trough is in.
CHART OF THE DAY: GOLD BREAKOUT CONTINUES
The price of gold rose to a fresh three-month high Thursday as economic uncertainty prompted investors to seek the safe-haven asset.
What’s the trade?
I don’t believe in this trade, says Guy Adami, but make no mistake the trade is certainly working right now.
I think buyers are long for two reasons – demand for jewelry and as a weak dollar trade, muses Tim Seymour.
Don’t forget gold takes the stairs higher and the elevator down, reminds Pete Najarian.
I’m bullish gold going forward, adds Joe Terranova. There is seasonality to the trade and I think it goes higher from here. Personally, I added to my position at $983.
BIGGEST DOW WINNER: ALCOA
Shares of Alcoa closed higher after the aluminum producer said China’s demand for the lightweight material would rise 8 percent in the second half from a year earlier, with full-year consumption up 4 percent, against the firm's earlier expectation of no growth in 2009.
"China is back," Alcoa CEO Klaus Kleinfeld said, adding that the country, the world's biggest aluminum consumer and producer, "had a lot of shovel-ready projects" for 2011, now being started by the government in response to the global economic slowdown.
What’s the trade?
If you believe in the story I’d play it with US Steel , Nucor and AKS , counsels Tim Seymour.
I like Walter Industries, adds Guy Adami. Valuations seem pretty reasonable. I think the stock could go higher even in a weak tape.
In commodities, be careful of Potash counsels Joe Terranova. There isn’t strong enough price action in grains to lift Potash.
I’m still bullish on the coal trade, adds Pete Najarian.
OPTIONS ACTION: PRIDE
Pete Najarian has spotted unusual options activity in Pride. The volume of calls traded, along with takeover chatter suggests to him the stock could go higher.
TOPPING THE TAPE: MOBILE PHONE TRADE STAYS HOT
It appears the smartphone trade is red hot with shares of Nokia closing higher after the company said it will develop new tools to make it easier to create apps for its Internet platform. Also Apple moved higher after William Blair initiated coverage with a buy.
What’s the trade?
I think the space is phenomenal, it’s just a question of which stock is for you, counsels Joe Terranova. Personally, my first move in the space would be Apple.
I’ve got Palm on my radar, adds Pete Najarian.
In the space I’d look at Qualcomm, counsels Guy Adami. Be careful of tops around $45 if you’re a short term trader but I like it long term.
TOPPING THE TAPE: CASINOS
Shares of MGM and rival Las Vegas Sands moved higher on Thursday after LVS secured commitments to raise up to $600 million through the sale of exchangeable bonds.
What’s the casino trade?
If you want to play Macau I’d do it with MPEL, counsels Tim Seymour.
SANTELLI ON THE GOLD BREAKOUT
As we mentioned above, the price of gold rose to a fresh three-month high Thursday. What’s driving the price action? CNBC’s Rick Santelli has a few theories.
Watch the video and find out about them!
You can see our entire conversation with Santelli at the end of the Word on the Street video.
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Trader disclosure: On Sept. 3rd, 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), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Najarian Owns (BAC) And Is Short (BAC) Calls; Najarian Owns (C) Calls; Najarian Owns (CBST) Call Spread; Najarian Owns (GS) Call Spread; Najarian Owns (JPM) And Is Short (JPM) Calls; Najarian Owns (MS) And Is Short (MS) Calls; Najarian Owns (MSFT) And Is Short (MSFT) Calls; Najarian Owns (PALM) Calls; Najarian Owns (PDE) Calls; Najarian Owns (SEPR) Time Spread; Najarian Owns (YHOO) Calls; Terranova Owns (FCX), (AMZN), (POT), (SU), (WFT); Terranova Owns December Gold Futures; Terranova Is Short (TM)
For Joe Terranova
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO
Virtus Diversifier PHOLIO Owns (IGE)
Virtus Diversifier PHOLIO Owns (DBC)
Virtus Diversifier PHOLIO Owns (DBV)
Virtus Investment Partners Owns More Than 1% Of (CAL)
Virtus Investment Partners Owns More Than 1% Of (DLR)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (SKT)
Virtus Investment Partners Owns More Than 1% Of (TNB)
Virtus Investment Partners Owns More Than 1% Of (UA)
Virtus Investment Partners Owns More Than 1% Of (CLB)
Seymour Owns (AAPL), (AA), (BAC), (UNG)
Seygem Asset Management Is Short (FXI)
Seygem Asset Management Owns (MTL)
Terranova Owns (QCOM)
Seymour Owns (VIP)
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