Stocks rose to fresh 13-month highs on Tuesday as upbeat broker views trumped some negative retail forecasts.
Specifically Microsoft generated tailwind for the bulls – closing at an 18-month high -- after Morgan Stanley raised its price target on the stock and said it was upbeat on the prospects for Windows 7. Meanwhile shares of Exxon Mobil closed in positive territory after Barclays raised the stock to "overweight" from "equal-weight."
Even so, the underlying tone was negative as investors fretted about the strength of the recovery after Home Depot said it faced a "great deal of pressure" in the housing and home improvement markets, while Target said it was cautious about its fourth-quarter performance.
A weak retail outlook tends to weigh on investor psychology since consumer spending accounts for about two-thirds of economic activity and is a key factor in corporate profits.
What should you be watching?
What I’m watching is 1100 on the S&P , says Pete Najarian. The market did not break below that level. It was once resistance and now I think it’s support.
I would look for support around 1068, adds Tim Seymour. The next level on the S&P I think is 1120. But I’m not sure we get much above that.
The path of least resistance appears to be up, muses Karen Finerman. There’s too much money on the sidelines that has to go to work. Right now, fundamentals don’t seem to matter.
But not all boats are going to rise, adds Joe Terranova. I think we’re at an inflection point where the breath of the rally will narrow. Perhaps not right now, but soon fundamentals will start to matter again.
COMMODITIES DOWN ON HIGHER DOLLAR
The U.S. dollar rose against a basket of currencies as risk appetite waned, pressuring oil , gold and other commodities. In fact, the dollar index recorded its largest daily gain since late September.
As you know, commodities and the U.S. dollar typically move in opposite directions lately.
What’s the trade?
The beneficiary of a weak dollar is resource names and multinationals, says Joe Terranova. I’d be a buyer of both.
TOPPING THE TAPE: GLOBAL GROWTH NAMES JUMPING
Investors appear to be bullish on global growth with Alcoa reversing on Tuesday to finish higher. Also steel companies such as MT and ag names including Potash pulled higher too.
What’s the trade?
Again, money managers see these stocks have been underperforming and they’re breaking out, explains Joe Terranova. It’s chase for performance.
I also think investors are betting on M&A in the ag space, adds Tim Seymour.
MARKET BUZZKILL: TARGET LEADS RETAILER SLIDE
Target dragged the retailers lower after the number two chain store said it was cautious about its fourth-quarter performance.
Home Depot fueled the negative sentiment after it said it faced a "great deal of pressure" in the housing and home improvement markets.
What’s the retail trade?
I’m long Target, reveals Karen Finerman. I like the story. If you’re trading the space I think it’s important to remember the bar had been set very low for retailers. Now it’s starting to be raised. Make sure to stick with companies with solid balance sheets.
I’m impressed with TJX , adds Pete Najarian.
OPTIONS ACTION: ANN TAYLOR
Pete Najarian has spotted unusual options activity in Ann Taylor .
I’m noticing a large volume of out of the money calls trading which suggests this stock could make a sharp move higher, he explains. It’s worth noting the company reports earnings Friday.
TOPPING THE TAPE: MICROSOFT HITS NEW HIGH
On Tuesday Microsoft hit a 52-week high after UBS singled out the software giant as its preferred pick on its tech ten list.
The move comes just days after analyst Brent Thill initiated coverage of Microsoft with a ‘buy’ rating. Although the stock has soared about 50% over the last 6 month Thill thinks shares still have room to run.
"Microsoft is headed into one of the strongest product cycles the company has had in the last 5 years," Thill tells us. "And I think there’s considerable pent up demand as a number of the older XP machines need to be upgraded. They never moved to Vista and I think they leap frog right to Windows 7.”
Thill has a $34 price target on the stock.
Should you get in?
I like this stock, says Pete Najarian. Windows 7 looks great to me.
I’m on board too, adds Joe Terranova. But beyond the fundamentals I also expect to see a momentum trade. Money managers are under-invested in this stock and may need to chase this name through the end of the year.
PLAYING THE DOLLAR BOUNCE
As we mentioned above, the U.S. dollar rose against a basket of currencies -- in fact, the dollar index recorded its largest daily gain since late September. How can you make money from the latest moves in the greenback. Watch the video and find out now!
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Trader disclosure: On Nov. 17th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (POT), (NUE), (AAPL), (BAC), (EEM), (GE), (INTC); Finerman Owns (FLS); Finerman's Firm Owns (MSFT), (NOK), (PLCE), (TGT), (CBY), (BGC), (WMT); Finerman's Firm Owns (BKS) Puts ; Finerman's Firm Is Short (USO), (IJR), (MDY), (IWM), (UNG), (KFT); Finerman's Firm Owns (BAC) Preferred, (BAC), (BAC) Call Spreads; Finerman Owns (BAC) Preferred, (BAC); Finerman's Firm Owns (FLS), Is Short (FLS) Calls; Finerman's Firm And Finerman Own (WFC) Preferred; Terranova Owns (POT), (SU), (AAPL), (GOOG); Terranova Owns Dec. Crude Oil . Futures; Terranova Owns Dec. Gold Futures; Terranova Owns Dec. Nat Gas Futures; Terranova Works For (VRTS) ; Najarian Owns (ANN) Call Spread; Najarian Owns (DTV) Calls; Najarian Owns (JRE) Calls; Najarian Owns (CLF) & (CLF) Calls ; Najarian Owns (AA) Call Spread; Najarian Owns (EXPE) Calls ; Najarian Owns (GE) Calls ; Najarian Owns (INTC) & (INTC) Calls ; Najarian Owns (LAZ) & short (LAZ) Calls ; Najarian Owns (MCD) Call Spread; Najarian Owns (QLOGIC); Najarian Owns (RIMM) Call Spread; Najarian Owns (YHOO) & (YHOO) Puts
For Nishu Sood
(TOL) Is an Investment Banking Client of Deutsche Bank
Deutsche Bank Owns (RYL)
(RYL) Is an Investment Banking Client of Deutsche Bank
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(PHM) Is an Investment Banking Client of Deutsche Bank
Deutsche Bank Owns (MTH)
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Deutsche Bank Owns (MDC)
Deutsche Bank Owns (LEN)
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Deutsche Bank Owns (KBH)
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For Jeff Saut
Raymond James Owns (WMT)
Raymond James Received Compensation from (MO)
Raymong James Makes A Market in (AMSC)
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