STOCKS SURGE ON OIL DROP
The Dow recorded triple digit gains on Friday after a sharp plunge in the price of oil and talk that Lehman may soon attract a major investor gave investors new confidence to buy.
OIL’S 2ND BIGGEST DROP IN 16 YEARS
After climbing about $6 dollars earlier in the week crude oil tumbled on Friday recording its biggest one-day drop in 16 years. It is not very often that you see a commodity move like that.
The decline was triggered by two reports —one showing an uptick in OPEC crude oil output and another showing an expected decline in U.S. travel over the September 1 Labor Day holiday weekend as high fuel prices hit consumers.
I got out of the energy market on Friday, Joe Terranova reveals. And I suggest you do the same. It doesn't know which way it wants to go.
COMMODITIES PARE WEEKLY GAINS
Commodities pared their gains Friday but were still strong performers, up over 4% on the week. Meanwhile the dollar recovered on Friday from the previous session's sharp losses, buoyed by a pullback in oil prices, stock market gains, and an ailing British pound.
I don't think the commodities bull is over big picture, says Guy Adami. But it probably is over through the end of the year. Commodity bull cycles tend to run every 10-15 years, but it can pull back for a 6 month period and I think that's probably where we are now.
Iron ore contracts have climbed between 70 and 90 percent for next year, adds Zach Karabell. That's a really strong leading indicator of demand coming out of China. This is a pullback in commodities and you have to ride it.
It's a battle zone out there in commodities, says Quint Tatro. If you can't watch your trades tick by tick I'd stay out of this space.
LEHMAN LEAPS TODAY
Shares of Lehman Brothers surged on Friday on speculation the besieged bank is a takeover target. Landenburg Thalmann analyst Dick Bove tells CNBC the acquisition could happen as soon as next week.
I don't see why anyone would buy Lehman right now, says Guy Adami. I don't know what's on their balance sheets.
It's impossible to predict, adds Zach Karabell. Investors don't know what's going on in Lehman or Freddie, Fannieor even Goldman.
If the financials can get out of their own way and start to rally that's what will take the market higher, adds Qunit Tatro. Watch the Financial Select Sector SPDR . It has been channeling sideways for the last several weeks. If that starts to take out the sideways trend the S&P should then take out 1295 and be on its way to 1350.
Shares of Freddie and Fannie took another tumble Friday on fears that shareholders could get left holding the bag should the duo require a government bailout.
The break out that Quint Tatro talked about above will likely be triggered by a resolution to the Freddie and Fannie crisis, says Guy Adami.
CONSUMER SHARES STRONG COMEBACK
The move in oil sent consumer stock higher on Friday with the Gap , Home Depotand Procter & Gamble leading the charge higher. By the end of trading the Consumer Discretionary ETF was up more than 2%.
The rebate effect has passed through, explains Zach Karabell, so what we're hearing now is fundamental strength.
Also this environment has forced merchants to run their businesses better, adds Guy Adami. I think that's what's behind these moves. I'm not saying run out and buy retail but companies seem to be running better.
I agree, adds Joe Terranova. Children's Place is a good example of that.
I'm playing retail, adds Quint Tatro. The action is indicative of a market that's trying to go higher, but they're just a trade.
SOLAR'S GREAT WEEK
Solar names have had a good week buoyed by Suntech’s strong earnings report leading some investors to believe that solar energy might be turning the corner in its efforts to become mainstream.
I find solar action very interesting, says Qunit Tatro. These stocks went higher even as oil went lower and that's unexpected. At the close I bought Evergreen Solar . Also I recommend looking at Energy Conversion Devices . They report earnings next week and the stock could be the standout.
I own MEMC Electronic, adds Zach Karabell. China is going to spend $160 billion over the next five years and a lot of that is going into solar, he says.
It seems to me that Applied Materials is the play, adds Guy Adami. The stock should have room to run.
I trade the space through Intel however I sold my position on Friday, counters Joe Terranova.
BERNANKE GIVES A BOOST
Federal Reserve Chairman Ben Bernanke buoyed stocks when he indicated the Fed should be able to keep interest rates low for some time. At a retreat in Jackson Hole, Wyoming Bernanke also suggested the recent drop in commodity prices coupled with reduced demand for resources should reduce the threat of inflation.
"(Also) Bernnake talked about a broad sort of change in the supervisory framework of banks to stop a crisis before it happens next time," says CNBC’s Steve Liesman who attended the conference.
It appers Bernanke clearly wants to breathe the fear of God into the investment banks.
"He also said the next bailout will be more of a receivership meaning the next time not only will the Fed wipe out equityholders but it will also reduce value to creditors. In otherwords haircuts for the creditors," Liesman says.
And in case you're wondering, Liesman came away from the conference with the impression that the Fed isn't moving rates anytime soon.
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Trader disclosure: On Aug 22, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Karabell Owns (AAPL), (FMCN), (GLD), (GOOG), (JPM), (NOK), (SLB), (RIO), (WFR), (CHL), (WFR): Tatro Owns (C), (GS): Quint Tatro Is The Principal Of Tatro Capital: Tatro Capital Owns (AAPL), (FXI), (QQQQ), (SPY), (T), (XLF), (JWN), (SSO), (ENER), (ESLR): Jon Najarian Owns (AAPL), (BKC), (BRK.B), (C): Jon Najarian Owns (RIMM) Calls; (SCHW) Calls, (AKAM) Calls: Terranova Owns (RIMM), (GS); Terranova is Long Sept. Mini S&P Futures, Terranova Owns (AIG) Puts; Terranova Is Long October Crude Oil Futures: Terranova Is Long Crude Oil Time Spread (Long Dec. 2008, Short Dec. 2012)
Terranova Is Chief Alternatives Strategist Of Phoenix Investment Partners, Ltd.; Phoenix Investment Partners Owns More Than 1% Of (ABD), (ARE), (BRE), (CNTY), (CLB), (OFC), (DLR), (ESS), (EXR), (FL), (IAT), (IGE), (LNET), (MAC), (OIIM), (PSPT), (DBC), (DBV), (SLB), (SKT), (BLV)
Terranova Is Co-Portfolio Manager Of The Phoenix Diversifier PHOLIO
Phoenix Diversifier PHOLIO Owns (IGE), (DBC), (DBV)