Both the Dow and S&P 500 clung to modest gains on Friday after shooting much higher on a stronger-than expected jobs report.
At first investors took the data as a welcome sign that the economic recovery was gaining strength. However, after climbing by triple digits, the Dow gave back most of its gains as investors worried the jobs data could mean the Federal Reserve might have to raise interest rates earlier than anticipated.
The prospect of higher rates sent the dollar higher, which in turn hit the prices of global commodities like crude oil and gold .
How should you be positioned?
Strategy Session with the Fast Money traders
It seems like the weak dollar / strong market correlation can’t be broken even after such impressive jobs data, says Pete Najarian.
I was watching the dramatic move lower in gold, says Karen Finerman. I can't help but wonder if there will be follow through on Monday.
We’ve been saying something would cuase the the dollar to rally - we just didn’t know what it was, reminds Guy Adami. I don't think it's a one day event. As a result, I don’t think the tumble in gold is over.
I didn’t think it was a bad week, muses Joe Terranova. We came in on Monday panicked about Dubai. All things considered, I’m impressed.
DOLLAR SPIKE GOUGES STOCKS, GOLD
The stronger dollar sent U.S. gold futures tumbling - they dropped below $1,200 an ounce in heavy trade on Friday breaking key technical levels.
What’s the gold trade?
The action in gold was a long time coming, says Guy Adami.
Once gold broke below $1200 I noticed that a lot of electronic stops went off, says Joe Terranova. That happened again when gold slipped below $1180. That next critical level is $1135.80. Today's action leads me to believe gold tests $1135.80.
I noticed a great deal of put action in a wide range of gold related trades, says Pete Najarian. That suggests big investors are placing bets to the downside.
BEARISH REVERSAL: DOLLAR SPIKE HITS COMMODITY STOCKS
The stronger dollar pressured the price of oil, which fell nearly $1 to below $76.
As the dollar jumped against the yen and the euro, it made dollar-denominated commodities like crude more expensive for holders of other currencies, which in turn, put prices under pressure.
What must you know to trade the space?
The question is whether we get a sustained rise in the dollar, says Rich Ilczyszyn, senior market strategist at Lind-Waldock. If you get that, crude could go down to $70 or below.
Also, Russia is ramping up production, adds Joe Terranova. I think that’s one of the reasons why oil can’t get above $80.
In the space I’m watching Apache, says Guy Adami. I think it trades with an 80-handle before it trades with 100.
If you want to play commodities, I’d do it with either steel or coal names, adds Pete Najarian. Look at Cliffs.
Shares of DuPont tumbled on Friday after the chemical company announced a delay in bringing its new corn seed technology to the marketplace.
The company said its Pioneer Hi-Bred International seed business had reset its plans to commercialize Optimum GAT corn and would not have controlled releases in 2010 and 2011 in North America.
What’s the trade?
The DuPont pullback may be an opportunity, muses Pete Najairan. But in this space, I’m watching the options action in rival Huntsman , he reveals. The call activity was extremely strong.
I’ve loved the name but if you’re long Eastman Chemical I’d get out, adds Guy Adami. It may be setting up for a short.
TOPPING THE TAPE: BANK OF AMERICA LEADS FINANCIALS
Shares of Bank of America led the financials higher despite the announcement of a dilutive share offering. In fact BofA’s $19.2 billion dollar offering marks the largest US bank capital raise on record.
What’s the bank trade?
Maybe this says that a secondary is actually a shareholder friendly way to get out of the TARP, says Guy Adami. And as far as I’m concerned, the move means the clock is now ticking for Wells Fargo.
Don’t forget now that BofA is out of TARP it means the bank can go out and find a new CEO anywhere, adds Pete Najarian. There are no pay restrictions anymore.
BEARISH REVERSAL: AMAZON LEADS CONSUMER ROLL OVER
Amazon shares closed lower on Friday after hitting an all-time high just one day ago. However the S&P Retail Index closed in positive territory with investors likely interpreting a strong jobs report to mean stronger than expected holiday sales.
What’s the retail trade?
It seems to me that Amazon has lost a little mojo, adds Joe Terranova. If you’re in this stock I’d think about going to the sidelines.
Don’t forget that retailers had a huge run, adds Karen Finerman. You may just be seeing profit taking.
BULL MARKET OR BS?
As investors attempt to digest a much stronger than expected jobs number, many are starting to wonder, is the report for real?
The new data stunned the Street, when it showed the economy shed only 11,000 jobs in November, well below the 130,000 loss financial markets had braced for.
Also, it showed the unemployment rate unexpectedly dropped to 10 percent from October's 10.2 percent.
Perhaps nobody is more skeptical than Euro Pacific Capital president Peter Schiff. Find out what he tells the Fast Money traders.
Watch the video now!
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Trader disclosure: On Dec. 4th, 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 (AAPL) Calls; Najarian Owns (AMAT) Calls; Najarian Owns (BAC) Calls; Najarian Owns (DD) Calls; Najarian Owns (GE) Calls; Najarian Owns (INTC), Is Short (INTC) Calls; Najarian Owns (TXN), Is Short (TXN) Calls; Najarian Owns (HUN) Calls; Najarian Owns (CLF), Is Short (CLF) Calls; Najarian Owns (HUN) Calls; Finerman Owns (GGWPQ), (TBT); Finerman's Firm Owns (BAC) Preferred, (BAC), (BAC) Call Spread; Finerman Owns (BAC) Preferred, (BAC); Finerman's Firm And Finerman Own (WFC) Preferred; Finerman's Firm Owns (M), (MSFT), (WMT), (CBY), (PLCE); Finerman's Firm Is Short (KFT), (IJR), (IWM), (SPY), (MDY), (USO), (UNG); Terranova Works For (VRTS); Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
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