NEW QUARTER, NEW LIFE
The headline: Bank Stocks Lead Monster Rebound; Better-Than-Expected Economic Numbers, UBS Write-Down, Lehman Offering Boost Stocks
If you’re still bearish on the financials you’re living in the past, Jeff Macke exclaimed. Lehman’s offering convertible preferred stock offering was “ambiguous at best” and it still catalyzed a monster rally. Take some gains if you’ve made them, Macke said, but this is the time to be a buyer of the financials on dips.
Pete Najarian has been buying protection in the form of puts for his investments in financials. He said on Tuesday he bought $26 puts, just out of the money, on the financials ETF to protect on the downside but allow for gains to the upside. At this moment, 75% of Najarian’s put purchase has been funded by call options.
Aside from the financials, this rally has been galvanized by the early-cycle recovery names – stocks like Dupont (DD), Home Depot (HD) and FedEx (FDX) that reported less-than-stellar news but moved higher anyway. “You cannot be too early in these names,” Guy Adami said.
Finally, Najarian noted that steel and copper stocks ripped higher, sending foreign markets higher as well. That wouldn’t have happened if the U.S. was in a state of decoupling with the rest of the world, as some people have argued.
STEADFAST MICROSOFT LIFTS TECH
The headline: Microsoft Lifts Tech Sector After WSJ Reports It’s Unlikely to Raise Yahoo Offer
Jeff Macke is a Yahoo shareholder and has been for some time. But on Tuesday, he bought Microsoft and began to drift out of his YHOO holdings to build a position in MSFT. The stock has been so beaten down on the merger deal that it’s just too cheap to pass up anymore, Macke said. The price action is solid, too, and he’s convinced his swap into MSFT will look obvious in a year. Message from Macke to Yahoo CEO Jerry Yang: Sell your company already!
Pete Najarian, another Yahoo shareholder, said he’s been selling Yahoo upside calls because he thinks it’s too likely this acquisition will continue to drag on, hurting both stocks in the process.
COMMODITY DROP DOESN’T DERAIL RALLY
The headline: From Oil to Gold to Wheat, Commodities Stocks Got Crushed Tuesday
Guy Adami is fond of saying that gold has a habit of taking the stairs up and the elevator down, and this action says it all. Adami thinks gold still has room lower, too, because it’s a commodity that people tend to pile into and then become frenzied trying to pick bottoms.
Jeff Macke agreed; gold is broken. But oil is just getting started. After spending months marking time around $100, Macke thinks it’s on the brink of running up. He would stop out below $95 but he expects crude to march toward $110 again. Use the USO ETF (USO) as a proxy to get long, he said.
MERCK LEADS DRUG REBOUND
The headline: Drug Shares Bounce Back After Merck (MRK), Schering-Plough (SGP) Massacred Monday on Disappointing Cholesterol Drug Trial
Growth drug stocks are a better bet than Big Pharma right now, according to Pete Najarian. He would rather buy Genzyme or ISIS , both of which are working in the cholesterol field, than MRK or SGP. This is not a single-day event, he said. These stocks are likely to feel the pain from Monday’s news for some time.
GM JUMPS 6%
The headline: GM (GM), Ford (F), Toyota (TM) Climb Despite Double-Digit Drops In March Auto Sales
You know it’s a good day in the stock market when even the automakers manage to rally, especially on the heels of more dismal sales numbers. Guy Adami called it a relief rally and said he remains convinced that the best way to play the autos is with BorgWarner , the parts maker that has been flying under the radar.
TAKE YOUR POSITION: RESEARCH IN MOTION
The headline: How to Trade Ahead of RIMM Earnings Wednesday After The Bell
Pete Najarian and Jeff Macke are both buyers of the Blackberry maker ahead of earnings.
Guy Adami would rather buy China Mobile for more overseas exposure.
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Trader disclosure: On Apr.1, 2008, 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 (DIS), (YHOO), (MSFT), (INTC); Najarian Owns (AAPL), (CSCO), (MSFT), (YHOO), (ORCL); Najarian Owns (AA) Calls, (BSC) Calls, (CCU) Calls; Najarian Owns (LEH) Puts, (MER) Puts; Najarian Is Long (XLF) And (XLF) Puts: Finerman Owns (GS); Finerman's Firm Owns (JCP), (MO), (MSFT), (VLO), (YHOO), (PM), (TIP):Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM), (GLD)