Stocks bounced from their session lows Tuesday but still closed in negative territory after the Fed announced new measures designed to boost the sluggish economy.
Specifically, the U.S. central bank said it would begin funneling proceeds from its maturing mortgage bonds into longer-term government debt in an effort to support the sputtering recovery.
The move marks an important policy shift for the Fed, which just months ago had been debating how to start winding up its various monetary stimulus programs.
Also, the Fed also renewed its pledge to keep interest rates low for an extended period, as had been expected.
How should you be positioned now?
Instant Insights with the Fast Money traders
This tells me the trade is risk-on, says Tim Seymour. The decision says to me that the Fed will do whatever it takes to be preemptive on deflation.
I agree that we’re looking at risk-on, says Joe Terranova. It seems the Fed is protecting the economy from more downside. However, I’m also a buyer of gold , he says, as a hedge.
As far as I'm concerned what the Fed said to us is that they’re willing to sacrifice the strength of the dollar to support the economy, says Brian Kelly. I’m a seller of US dollars and a buyer of Swiss Francs. And I’m also a buyer of gold.
For me the play is long one few countries that’s tightening; namely Australia; play it long EWA , says Steve Cortes on the Halftime Report.
I’d go after consumer staples stocks which have been beaten up, counsels Jon Najarian. My pick is Colgate .
Looking at the market broadly, I’m very concerned by the lack of participation in the financials , says Pete Najarian, (Jon's brother). If we expect the S&P to climb much higher the financials need to participate.
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CHINA SLOWDOWN
Commodities took a hit on Tuesday after China triggered market jitters after the latest data out of Beijing showed a slower-than-expected growth, signaling the world's third-largest economy may be losing its steam.
"China is certainly the global growth engine for almost all parts of the world, especially to the United States. Their macro data is influencing the psychology of investors of all assets here," explains Craig Peckham, equity trading strategist at Jefferies & Co in New York.
Chinese Imports % Change
June-July ‘10
*Iron Ore -6.2%
*Crude Oil -74.3%
*Refined Petroleum Products -30.5%
*Steel Products -8.7%
*Copper, Waste & Scraps -157.8%
*Aluminum, Waste & Scraps -68.4%
What’s the trade?
Of all the commodities listed above I'm watching oil ; I still think oil is going to $90 and I’d play it long integrated names or the refiners, says Joe Terranova.
I’m a buyer of commodities, says Tim Seymour. China is still growing and commodities should remain in the sweet spot -- especially as a recovery play.
I agree, adds Pete Najarian. I’d jump into Exxon as well as Freeport McMoRan on any pullback.
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ANALYZE THIS: SHORT THIS MOVE?
The latest move by the Fed left some saying that the central bank is about to head down the wrong road.
Among them is Miller Tabak strategist Peter Boockvar. Find out why he tells the desk, "The Fed scares me!"
Watch the video now.
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AFTER HOURS ACTION: DISNEY
Shares of Disney made small gains in extended trade after the company reported sharply higher profit and sales that easily beat Wall Street estimates, thanks to a boost from sports network ESPN and a turnaround at its movie studio.
Looking at the numbers, the entertainment giant, whose operations range from television networks to theme parks, said it earned $1.33 billion, or 67 cents a share in its fiscal third quarter, up from $954 million, or 52 cents a share last year.
Disney's revenue grew to $10 billion in the period, up 16 percent from $8.596 billion.
The results handily beat a consensus estimate from Thomson Reuters, which forecast that Disney would earn 58 cents a share on sales of $9.384 billion.
What’s the trade?
I’m bullish, says Joe Terranova. I think the stock could go to $40 over the next 3 months.
> For more coverage of Disney earnings click here
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