With Apple , Google and the rest of technology losing momentum investors are starting to fear that the bull market rally may be out of steam.
As Fast Money series producer John Melloy writes in his blog the Technology SPDR has been the top performing sector ETF this year. And a market without a leader, can’t keep going higher.
Meanwhile, the negative tone in Tuesday's action was amplified by a worse-than-expected consumer confidence report.
Of the major indexes the Nasdaq fared the worst after Baidu reported quarterly revenue that missed expectations and said its fourth-quarter sales would miss expectations by more than 10 percent.
However energy sparked some strength after BP reported third-quarter earnings that beat expectations. The results lifted other energy companies, with Dow components Exxon Mobil and Chevron both making gains.
How should you be positioned?
Strategy Session with the Fast Money traders
We’re losing momentum in earnings, we saw the S&P have trouble at 1100 and now the market leader is starting to unwind, says Joe Terranova. However I do think the broad market held up reasonably well on Tuesday. If we get back above 1070 positive momentum will prevail.
I’m not so sure about that, counters Tim Seymour. If you took away big oil’s impact on the market we would have had a much more dismal day. The economic numbers weren’t good. I’m not sure it’s just tech. I just think the whole thing is breaking down. I think investors are starting to get scared that stimulus is starting to trickle out of the market.
I don’t think the tech trade is over, counters Karen Finerman. If you look at the last 6 weeks, the sector has had an extraordinary run. To give up 2 weeks of that doesn’t worry me. And of all the economic data, the piece I like the least is consumer confidence. It's backward looking and doesn’t really measure anything specific.
And don’t forget that IBM announced a stock buy-back plan, adds Pete Najarian. Investors found that bullish and that helped push the Dowhigher.
I think investors took IBM’s buyback to mean other companies may do something similar, muses Seymour.
AFTER HOURS ACTION: VISA
After hours, Visa says it turned a profit in its fiscal fourth quarter, as cost cutting and growing debit-card use made up for a decline in payment volume reflecting consumers' spending cutbacks.
The payments processor posted profit of $514 million, or 69 cents per share, on revenue of $1.87 billion. Adjusted profit was 74 cents per share.
Visa's results reflect a growing reliance on debit cards, while banks report higher credit card payment defaults as unemployment persists.
What’s the trade?
Betting against Visa has not been a good trade, says Karen Finerman. I would not short this stock.
I agree, says JoeTerranova. I’d either be long Visa or step to the sidelines. The same is true of Mastercard.
MARKET BUZZKILL: IT’S ALL ABOUT CONFIDENCE
As we mentioned above, adding to the negative tone in the market, consumer confidence fell to lower-than-expected levels in October, amid growing concerns that job market conditions will worsen in the near term
As a result, JCPenny , Nordstrom and other consumer discretionary names took a hit.
What’s the trade?
In this space, I like names such as TJX or Children’s Place that trade at a low multiple, counsels Karen Finerman. And be careful of higher fliers such as UnderArmour .
I agree, says Pete Najarian. In the space it wouldn’t surprise to me see Walmart move higher. Weak consumer confidence might actually benefit them.
YIELDS BACK OFF
Treasury prices strengthened Tuesday, pushing yields lower, after another strong auction. Investors again welcomed new debt into the market, snapping up $44 billion in two-year notes.
The bid-to-cover ratio, a measure of demand, was 3.63, much higher than 3.23 at an auction in September or the 2.68 in August for notes with a similar maturity.
The two-year note rose 5/32 to 100 3/32, while its yield fell to 0.95 percent from 1.04 percent late Monday.
Graham Allen, a senior portfolio manager of the Touchstone Core Plus Fixed Income Fund, says, "For some time, the dilemma has been, can the market absorb supply? So far we're seeing that it can."
What’s the trade?
I’m seeing call buying in the UUP, says Pete Najarian. It says to me investors are getting excited about the dollar – but it could be short-term.
From a technical perspective, if the Dollar Index breaks above 77.50 I’d expect to see the dollar move significantly higher, adds Tim Seymour.
TOPPING THE TAPE: EARNINGS PUMP ENERGY STOCKS
Energy shares sparked at least some positive sentiment after BP reported third-quarter earnings that beat expectations. The results lifted other energy companies, with Dow components Exxon Mobil and Chevron both making gains.
Earnings Calendar: Oil
Tuesday: BP, VLO
Wednesday: COP, HES
Thursday: XOM, PDE
What’s the trade?
I’ve got my eye on Hess , says Joe Terranova. It’s highly correlated to the price of oil so I’m thinking Q3 will be strong. I’d be a buyer of Hess as a bet that oil moves higher from here.
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CNBC.com with wires