On Wednesday, the Dow broke above the 10,000 level for the first time in a year with bullish investors driving stocks higher on stronger-than-expected earnings from JPMorgan , Intel and CSX as well as better-than-expected retail sales.
From a technical perspective 10,000 doesn’t hold a great deal of significance but psychologically it’s clearly a symbol of how far the market has come since last year when investors fled collapsing financial markets as the economic outlook soured.
In fact, reaching 10,000 could encourage more investors to buy stocks.
A fresh 14-month low for the dollar also helped stocks as investors bet the slumping currency will lift profits of large multinational companies with big overseas sales.
What must you know?
I don’t feel Dow 10,000 is important, says Tim Seymour. In fact I think it’s a garbage number. What matters is that we saw data that showed consumers were cautiously spending. And I think that trend continues.
I do think 10,000 is an important number for individual investors, counters Steve Grasso. I think Main Street has probably missed the rally so far and I expect to see individual investors start dipping a toe, now. As a result I expect the rally to continue.
We’re in the middle of a stampede right now, says Guy Adami. You can’t get in the way of the momentum. But at some point that’s going to change. If you’re looking for a trade put Intel on the radar, he counsels. If the stock closes below $20.5 I think it could be a short.
I also wonder if Intel is getting ahead of itself, muses Pete Najarian. There may be better places to put your money to work. Turning attention to the broad market, I’m seeing a lot of options action overall, he adds. I think it’s investor buying protection as they make cautious bets the market goes higher.
DOW 10,000: JPMORGAN SETS THE TONE
As we mentioned above shares of JPMorgan drove the Dow higher on Wednesday after quarterly profit rocketed to a forecast-beating $3.6 billion.
Most of JPMorgan's banking revenue gains came from bond trading, where rising asset values have helped Wall Street firms all year. Stock and bond underwriting revenue also rose jumped.
The investment bank reported net income of $1.9 billion, compared with $882 million a year earlier. That increase came in part from gains of $400 million on leveraged loans and mortgage-related securities that had a $3.6 billion writedown in the year-earlier quarter.
Trading gains lifted fixed income markets revenue to an eye-popping $5 billion, up from about $800 million a year earlier. Stock underwriting revenue rose 31 percent to $681 million, and bond underwriting fees rose 19 percent to $593 million.
Of all that data, perhaps most important to note is that investment banking drove JPMorgan's results, and that should bode well for other large banks due to report later this week, including Goldman Sachs and Citigroup.
How should you be positioned ahead of the numbers?
Clearly the JPMorgan numbers bode well for Goldman, says Guy Adami. I think the Goldman numbers will be fine. But I wonder what they need to report to make the stock go higher. Personally, I’d take profits. And in the space I’d look at some downstream plays such as Raymond James and Greenhill .
I’d look at Barclay’s , counsels Tim Seymour. I think they’re a fantastic bank that’s cleaning up their balance sheet.
DOW 10,000: INTEL LEADS TECH SURGE
As we mentioned above, shares of Intel surged on Wednesday after analysts raised their price targets for the stock following a quarterly earnings report and revenue forecast that blew past expectations, giving investors hope of a tech sector recovery.
UBS raised its price target for Intel shares to $27 from $24 after the report while Lazard upped its price target to $26 from $24.
"Intel is benefiting from strong demand for retail notebooks and Nehalem servers. With better control of costs and prices, we see a structural improvement in Intel's margin profile," Needham & Co analyst Edwin Mok said in a research note in which he announced a price target increase to $28.
Related stocks are also climbing with computer maker Dell and Microsoft both higher on Intel’s strong results. Technology investors appear to be betting on a boost in computer sales after Microsoft releases its upcoming Windows 7 computer operating system on Oct. 22.
What’s the tech trade?
If you’re looking for a play, I’d look at Hewlett-Packard, says Guy Adami. I think it’s a well run company and valuations are cheap.
I agree, echoes Pete Najarian. I think HPQ can get up above $50.
OPTIONS ACTION: DOW 10,000: WHERE IS IT HEADED NEXT?
Now that the Dow has crossed the psychologically important 10,000 level, where’s it heading next? For insights it’s always good to check the options market and nobody follows the action more closely than OptionMonster Jon Najarian.
He says the pits are short and not believing. "I've heard reports that the pros are long but I'm not seeing it," he tells the desk.
Want to hear more? Check out the entire interview. Watch the video now!
You can find out entire interview with Jon Najarian at the end of the Word on the Street video.
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Trader disclosure: On October 14, 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), (NUE): Grasso Owns (AAPL), (ABK), (ASTM), (BAC), (C), (COST), (CSCO), (PFE), (PRST), (V), (WMT): Seymour Owns (AAPL), (BAC), (BHP), (EEM), (FXI), (INTC), (TTM), (LVS): Pete Najarian Owns (BX) Calls: Pete Najarian Owns (DELL) Call Spread: Pete Najarian Owns (HOG) Nov. Call, Is Short (HOG) Oct. Calls: Pete Najarian Owns (XLF) Calls: Pete Najarian Owns (YHOO) Call Spread: Pete Najarian Owns (LAZ), (LAZ) Puts: Pete Najarian Owns (C) Calls
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