Fed Cuts; Dow Rocks

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BEST DAY IN FOUR YEARS:
The headline: Dow Surges Most Since April 2003 After Fed Cuts Rates More Than Expected

The big story before 2:15 was the surprise Lehman Brothers (LEH) earnings. Pete Najarian spent the morning trading the inexpensive upside calls in the XLF ahead of the Fed decision. He had been long the financials, but since the rate cut, his conviction is even stronger.

Guy Adami had been saying he expected a sell-off if the Fed cut rates by 50 basis points, as investors would interpret it as a “panic move” – he was proven wrong.



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Guy Adami had been saying he expected a sell-off if the Fed cut rates by 50 basis points, as investors would interpret it as a “panic move” – he was proven wrong.

FED POP: FINANCIALS:
The headline: Financial Stocks Among Biggest Beneficiaries of Fed Cut

If Lehman Brothers (LEH), which had been at the bottom of the proverbial totem pole, could blow out numbers like it did Tuesday, then other financials like Goldman Sachs (GS) and Morgan Stanley (MS) should “absolutely obliterate the numbers,” Guy Adami said.

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Parsing through the actual FOMC statement, Jeff Macke noticed a complete change in direction from previous statements. It pointed to shift in concern from inflation to growth, he said. The language made it clear that Bernanke was guiding toward protecting growth while effectively dismissing inflation. With language like that, “you can’t be short financials,” Jeff said.

FED POP: CONSUMER STOCKS:
The headline: Retail Shares Surge as Fed Cut Sends Investors on Shopping Spree

This cut will be good for the American consumer, Jeff Macke said, especially with the holiday season around the corner.

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Best Buy (BBY), which jumped the most in a year after reporting better-than-expected earnings, was an indicator even before the surprise cut. The numbers were great, Pete says, but the most important thing was that the retail bellwether raised its outlook.

FED POP: CONSTRUCTION STOCKS:
The headline:Cummins (CMI), Caterpillar (CAT), Industrial and Construction Stocks Soar on Fed Decision

Most of these stocks are already working in other countries, Guy Adami said. If the cut can get a company like Caterpillar working in North America, the rest will take care of itself.

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Pete Najarian thinks CAT is the construction stock with the most upside.

FED POP: COMMODITIES:
The headline: Crude Climbs 1.2% to $81.51, Yet Another Record, After Fed Rate Cut; Gold Futures Surge Past $735 to Highest Level in 27 Years; Commodity Stocks Rally

Commodities guru Dennis Gartman joined the panel via the Fast Line, saying he was “really surprised” with the Fed decision. The rally in the stock market should carry through for a while, he said, because the drastic cut will provide a “juice to the economy.” And it is evident that Bernanke has written off inflation and is now focused on maintaining growth, Gartman said. Oil and gold will likely continue to go higher, he said, as the Fed didn’t seem to indicate too much interest in the declining U.S. dollar.

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Gartman’s favorite holdings going forward are Suncor Energy (SU) and wheat: “those are the two best trades.” In the coal space, Gartman said Arch Coal (ACI) was the best-of-breed company.

FED POP: FOREIGN STOCKS:
The headline:Emerging Markets ETF (EEM), China ETF (FXI), Brazilian Stocks Soar on Rate Cut

The rate cut had a big response overseas, Tim Seymour said, joining the panel to discuss an area of his own expertise. He believes emerging markets will “test new highs” in this period, but the risk trade is back on, so investors should proceed with caution.

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Tim said he believes Europe is on board with the rate cut cycle, but emerging and commodity central banks are not. His favorite trades in this new dynamic are getting long gold and Brazil by either investing in the country’s banks or through the Brazil ETF (EWZ). Brazil is a better resource play than any other nation, Tim said, including Russia, and it has a bigger demographic consumer story to go along with it.

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Trader disclosure: On Sept. 18, 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (INTC); Pete Najarian Owns (XLF); Pete Najarian Owns (GS) Options; Pete Najarian Is Short (ETFC); Finerman's Firm & Finerman Own (HD); Finerman's Firm Owns (ASD), (AA), (COP), (TXI), (TGT), (MO), (NMX); Finerman's Firm Owns S&P 500 Puts; Finerman's Firm Owns Russell 2000 Puts; Finerman's Firm Owns (WMT); Gartman Owns (YZC); CIBC Gartman Index Owns Crude Oil, Gold, Wheat, Is Short the Dollar against the Canadian Dollar and the Euro