Market Uneasy Ahead of Fed, Goldman


The Dow stumbled on Monday, roiled by worries about how big a bite the global financial crisis has taken from banks' profits and fallout from a massive investment fraud scheme.

JPMorgan Chase was the biggest drag on the Dow after Merrill Lynch cut the stock to an "underperform" rating and forecast a loss for the bank's fourth quarter.

The downgrade comes ahead of quarterly earnings this week from two other big financial names. Goldman Sachs releases numbers Tuesday and Morgan Stanley does the same Wednesday. Analysts expect Goldman Sachs to report its first quarterly loss since going public in 1999.

Another blow to sentiment stemmed from concern about the financial sector's exposure to potential losses related to investment manager Bernard Madoff, who is accused of masterminding a $50 billion fraud.

Technology shares also pulled the market lower after Goldman Sachs cut its rating on Apple to "neutral" and removed the iPod maker from its conviction buy list, citing falling consumer demand for its products.

Economic data gave investors more reasons for caution. A gauge of manufacturing in New York State hit a record low in December, while homebuilder sentiment remained at record lows for the month.

Now, investors are looking ahead to an interest-rate decision from the Federal Reserve on Tuesday. The U.S. central bank is expected to cut its benchmark fed funds rate to 0.5 percent from 1 percent in hopes of boosting the weak U.S. economy.

Strategy Session with the Fast Money Traders

I like seeing that volatility is moving lower, says Karen Finerman. It allows the market to get back to fundamentals. However, intraday we’re still seeing huge swings. Monday’s move in oil is a good example of that.

Looking at the dollar, I think it’s priced in a base, says Tim Seymour. Considering what’s happening in Europe, I don’t expect the dollar to go lower.

In breaking news, CNBC’s Michelle Caruso Cabrera reports that Tremont Capital says 7% of their assets were exposed to Madoff.

The market is digesting a lot of bad news, says Pete Najarian. The lower VIX suggests to me that investors are finding value in this market. Freeport, Nucor and US Steel have absolutely been oversold, he says.

I don’t think we even need oil to go up to make energy related names trade higher, adds Finerman. It just needs to stop going down.

We’re on the other side of bubble mountain, warns Jeff Macke. Commodities stocks are great for a trade but if they pop 20%, get out.


Goldman Sachs downgraded Apple to "neutral" from "buy" on concerns about weak consumer spending in the near-term, and risk of the stock's valuation premium coming down if iPhone sales fall short of expectations in the first half of 2009.

The brokerage, which has a price target of $115 on the stock, removed Apple from its Americas buy list as it expects the company to face a tougher environment in the March and June quarters as consumer demand takes another leg down.

I still believe in some of the tech names, says Pete Najarian. but if you get significant moves, take profits. And keep an eye on Cisco, he counsels. It’s been beaten and there could be opportunity.

The semi-conductors still look good to me, adds Tim Seymour.

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Trader disclosure: On Dec. 15th, 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 (MSFT), (WMT), (SDS), (MCD); Najarian Owns (FCX), (RDC); Najarian Owns (BMY) Calls; Najarian Owns (NUE) And Is Short (NUE) Calls; Najarian Owns (UYG) And Is Short (UYG) Calls; Finerman's Firm Owns (AET), (DSX), (MSFT), (DVN), (APC); Finerman's Firm Is Short (VNO), (IYR), (IJR), (MDY), (SPY), (IWM), (COF), (USO); Seygem Asset Management Owns (FXI); Seymour Owns (AAPL), (BAC), (F), (MER), (TSL), (CCJ); Seymour Owns Shares Of Uranium One, Inc. with wires