Banks stocks dragged down the broader stock market on Wednesday with Merrill analyst Richard Bernstein writing the credit crisis is “far from over.”
Shares sold off on worries about the widening scope of mortgage losses, as well as disappointing earnings from Deere & Co which heightened concerns about the economy's health.
The plays: Investors should sell the rallies and buy the fear, says Jeff Macke. Right now we’re somewhere in the middle.
I shorted HSBC , Tim Seymour reveals. They’ve written down a lot more than they’ve been able to raise.
I agree that it’s a good time to be short financials, adds Jon Najarian.
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OIL REBOUNDING ...GASOLINE SUPPLIES DECLINE
The news: A rebound in oil prices added to the negative tone in the market after a government report showed unexpectedly large declines in crude and gasoline stockpiles in the latest week. Gasoline stocks fell by 6.4 million barrels, the Energy Information Administration said, which was far greater than analysts had expected.
The plays: The price of oil got too high and refiners backed off and stopped making product, explains Joe Terranova. We’re at our lowest levels since December 2007 and that’s what’s moving the market. I think the trade is long Valero, he says, but if it doesn’t perform quickly get out!
I’d look at Anadarko, XTO Energy and Devon, says Tim Seymour. They’re independent domestic plays.
I’m seeing extreme call spread buying in XTO, adds Jon Najarian.
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TOPPING THE TAPE: COMMODITY STOCKS
The news: U.S. Steel, Potash , and Mosaic are all rebounding on Wednesday from the August commodity swoon. Also gold has soared after recently declining to a 7-month low.
The plays: I think the standard of living trade is back on again, says Joe Terranova. We’re now at a valuation where fundamentals are diving the commodities. Look at Potash, Freeport McMoRan FCX, and United States Steel.
Boulderdash! exclaims Jeff Macke. Trade the technicals on all these things.
I’d keep an eye on Freeport McMoRan and Vale, says Jon Najarian. I like both of those names in this space.
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MACY’S, RETAIL ADD TO DOWNDRAFT
The news: Earnings from some of the nation’s largest retailers added to the downward pressure on stocks, Wednesday. For example, although Macy’s beat estimates their forecast fell somewhat short.
The plays: This is not the trend you want to see heading into back-to-school season, says Jeff Macke. I’m long Wal-Mart and Costco, but they’re not short term trades. If you trade retail I think the risk is to the downside.
iPHONE COMING TO BEST BUY
The news: Apple appears driven to take America by storm. Late word suggests that Apple and Best Buy will join forces to sell the iPhone in Best Buy stores.
The plays: I went into two Apple stores and both were sold out of iPhones, says Jon Najarian. I like it.
The technicals tell me that this stock wants to go higher, adds Joe Terranova.
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IN THE ZONE: THE BEST SOLAR PLAY?
The news: Solar names have been performing well this week with LDK reporting blow out earnings and Applied Materials citing strong demand for their solar chips.
