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Oil Plunge Sparks Rally

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OIL PLUNGE SPARKS MARKET RALLY

The Dow and broader stock market jumped on Thursday as oil prices dropped sharply for a third day. Optimism held the day due to several strong earnings reports including one from JPMorgan Chase.

I expect to see another 400 points to the upside on the Dow Jones, Guy Adami says.

Sell the rips and buy the dips, exclaims Jeff Macke. How many times do I have to tell you!

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BIGGEST 3-DAY OIL DROP SINCE '03

Oil prices fell below $130 a barrel for the first time in more than a month Thursday, as the dramatic slide entered its third day along with a sharp sell-off in natural gas.

Worries about softer demand for oil amid higher inventories last week and volatile trading on options on the front month August contract combined to drag down crude futures.

I got out today, reveals Jeff Macke. The uptrend is broken now for the near-term.

Stay on the sidelines on Friday when Schlumberger reports, counsels Guy Adami, and that should tell you how to trade Baker Hughesand Halliburton ahead of their earnings.

Also, I’d buy Exxon Mobil and ConocoPhillips on this news, he says.

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NATURAL GAS PLUNGES 8%Natural gas fell more than 8 percent Thursday, marking its biggest one-day drop in nearly a year. Prices have tumbled more than 20 percent since their peak before the Fourth of July, and are now trading at their lowest point since April.

A number of market observers say there was nothing supporting the run up in natural gas prices and that the sell-off in oil has helped speed the declines in gas.

This tells me something else is going on, says Karen Finerman. I think it’s rotation out of energy.

Symbol
Price
 
Change
%Change
POT
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Some commodities charts don’t occur in nature, adds Jeff Macke. Look at Potash , the stock is way ahead of itself. This kind of rotation is vicious. I’d get out.



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AFTER HOURS ACTION: MERRILL LYNCH

Merrill Lynch posted a $4.9 billion second-quarter loss because of writedowns but said it is close to selling $8 billion of assets in a bid to raise fresh capital. The news sent shares about 8% lower after hours.

Chief Executive John Thain said, "Our core franchise continues to perform well despite the extremely challenging market environment."

The company, which has recorded more than $30 billion of write-downs since the third quarter of last year, has been one of the hardest hit by the credit crisis on Wall Street.

I expect the financials to pull back a little on the news from Merrill Lynch, says Pete Najarian. Take profits if you have them.

After hours the market also started pricing in a slightly higher risk premium into the entire business due to the write-downs, explains Karen Finerman.

"The quarter looks pretty disastrous to me,” says Sanford Bernstein analyst Brad Hint on Fast Money. “They made some progress taking their exposure to bad debt off the books but plenty more remains.”

> For complete coverage of Merrill Lynch earnings click here


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AFTER HOURS ACTION: MICROSOFT

Microsoft on Thursday reported fourth-quarter earnings of 46 cents per share, or $4.3 billion, on revenue of $15.84 billion -- up from last year but falling short of analyst estimates.

The earnings rise was boosted by an increase of personal computer sales in emerging markets and demand for new computer server software, especially strong demand for Windows 2008, the flagship software at its server and tools division.

After hours about 8 million shares traded with the stock down as much as 5%.

The results were a little disappointing, says Karen Finerman, but it doesn’t change the fundamental story. I’m sticking with the name.

They seem like the gang that can’t shoot straight, exclaims Jeff Macke. I wish I had sold my position.

> For complete coverage of Microsoft earnings click here.




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AFTER HOURS ACTION: IBM

IBM turned in earnings that rose 22 percent as both its profit and its revenue topped analysts' forecasts. Despite the positive news shares moved slightly lower after hours in anticipation of a negative open.

The Armonk, N.Y.-based technology company also raised its profit outlook for 2008, saying it expects to earn at least $8.75 per share on the year, an improvement of 25 cents per share over IBM's previous guidance.

> For complete coverage of IBM earnings click here


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AFTER HOURS ACTION: GOOGLE

Google's quarterly net income fell short of Wall Street expectations Thursday, suggesting it may be suffering from a weakening U.S. economy like its rivals, and after hours its shares fell as much as 7 percent.

Despite the company's long-standing refusal to provide forecasts on its financial results, investors have come to count on Google to deliver positive revenue and earnings surprises over and above consensus expectations each quarter.

They have a slowing rate of growth and that’s a problem, says Jeff Macke.

“I think Google will be in the penalty box for the next month but ultimately they’re the oxygen of the internet, says Piper Jaffray analyst Gene Munster on Fast Money. “Expect Google to trade sideways through the summer.”

> For complete coverage of Google earnings click here


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CELL PHONE TRADE WORKING

Nokia stock popped today after the world's top cell phone maker reported better-than expected results for the second quarter Thursday and upgraded its forecast for the global handset market.

The move is particularly good news for Fast Money’s Pete Najarian who has been bullish on the stock for quite sometime. Nokia's share price had plunged about 40 percent this year amid concerns about the consumer.

I love this stock, Pete says, but I had to sell into the strength.




















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Trader disclosure: On July 17, 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 (WMT), (GS), (MSFT), (HAS); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Najarian Owns (AAPL), (CHK), (TSO), (XLF); Najarian Owns (ANR) Puts; Najarian Owns (CSCO) Calls, (MER) Calls, (SLB) Calls, (YHOO) Calls, (UYG) Calls; Finerman Owns (GS); Finerman's Firm Owns (MSFT), (NOK), (TSO), (SUN), (VLO), (AXP), (MRK); Finerman's Firm Is Long SPX Index puts; Finerman's Firm And Finerman Own (C) And (C) Leaps; Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM)

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