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Fed Firepower Ignites Rebound

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FED FIREPOWER IGNITES REBOUND

Stocks leapt higher on Wednesday after the Federal Reserve surprised Wall Street and said it will buy long-term Treasury bonds for the first time in four decades in an effort to revive the recession-hit economy.

The Fed's move, aimed at resuscitating lending, drove the yield on the 10-year U.S. Treasury note to its biggest one-day drop since the 1987 stock market crash and 30-year mortgage rates fell to around their lowest levels on record.

Meanwhile, banks and home builders gave the market a big lift as investors bet that the Fed's move would kick-start lending and home buying.

Strategy Session with the Fast Money Traders

The Fed is targeting housing and that’s where we need to go to revive the economy, says Tim Seymour. The market likes it.

It’s clear that the Fed is going to fight the crisis with everything they’ve got, adds Joe Terranova. As an investor I wouldn’t fight them.

It seems to me the market wants to go even higher, adds Guy Adami.

The fact that they’re targeting housing is a big deal, adds Pete Najarian.

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BANK OF AMERICA UP ON CEO TARP TALK

Bank of America Chairman and Chief Executive Kenneth Lewis said the largest U.S. bank could repay the $45 billion of government capital it has taken by late 2009 or early 2010, depending on the economy, according to an interview published in the Charlotte Observer.

The bank could repay the infusion now, Lewis said, if it were not maintaining higher-than-normal capital to account for the "fragile" state of the financial system. He also expects the Charlotte, North Carolina-based lender to be profitable in 2009 absent an "unexpected meltdown."

There seems to be a lot of bullish sentiment in the financials, explains Melissa Lee. Since putting in a bottom earlier this month the Financial Select Sector SPDR XLF is up 51%.

But you have to be careful in this space, warns Guy Adami. It seems to me if you have to be in Citigroup , it’s better to be in the preferred than the common stock. The shorts are getting squeezed.

And we still don’t have Geithner’s plan, adds Joe Terranova. Keep and eye on Goldman , Morgan Stanley and JP Morgan – the Geither plan should create a tailwind and they have the most to benefit.

I like banks in Brazil, adds Tim Seymour such as Banco Bradesco and Uniao de Bancos Brasileiros . They did not participate today and I think they might tomorrow.

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TOPPING THE TAPE: THE CONSUMER

Wednesday’s Fed action promises to send 30-year mortgage rates to their lowest levels on record. The action is clearly intended to spark new lending and jumpstart the housing market.

Keep an eye on consumer discretionary, says Joe Terranova, it's a heavily shorted space. I think you’ve going to see a lot of short covering now and that could boost the sector.

To me the play is Home Depot, says Guy Adami, but don’t chase it. However it’s probably going to $24.

Options action in the SPDR S&P Homebuilders suggests to me the homebuilders could be going higher, says Pete Najarian.

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AFTER HOURS ACTION: ORACLE

Shares of Oracle rose as much as 7% after hours, after the business software maker reported stronger-than-expected quarterly results and said it would pay its first dividend to shareholders.

I told you so, reminds Guy Adami.

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TOPPING THE TAPE: TECH MAINTAINING FORM

Deal-making drove the Nasdaq higher after the Wall Street Journal revealed that IBM is interested in acquiring Sun Microsystems for $10 to $11 per share. The price implies a premium of more than 100 percent from Sun Micro's closing price on Tuesday.

It seems like IBM is overpaying a little bit, muses Pete Najarian. But they’re clearly taking a leadership position; they’re aggressive.

And this doesn’t make Hewlett-Packard dead money by any means, adds Guy Adami.

Also keep your eye on the Semiconductors HLDRs ETF , adds Najarian. Chips continues to perform.

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OUTSIDE THE STOCKS: DOLLAR PLUMMETS

The U.S. dollar plunged on Wednesday, hitting a two-month low against the euro, after the Federal Reserve said it will buy $300 billion of long-dated Treasuries over the next six months to boost the U.S. economy.

The euro surged above $1.34 for the first time since mid-January as analysts feared the Fed's move would flood the market with dollars and increase already large U.S. deficits.

I think the pull back is beneficial because it helps American exports, says Joe Terranova. And if you’re looking for a currency play, I’d get long Canada’s dollar or Australia’s dollar.





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Trader disclosure: On Mar. 18th, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (AAPL), (BAC), (EEM), (FXI), (GG); Seymour Is Short (X); Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Terranova Owns (AMZN), (BP), (KCE), (JPM), (X), (POT), (WYNN), (XBI), (HESS), (INTC), (BRCM), (DELL), (JOYG), (FXC), (XOM); Terranova Owns (COP) Calls; Terranova Owns (DIS) & (DIS) Calls; Terranova Owns (AMGN) & (AMGN) Puts; Terranova Owns MACI Oil Futures; Terranova Owns (IBM) Spread; Najarian Owns (C) Call Spread; Najarian Owns (FCX) Call Spread; Najarian Owns (GDX); Najarian Owns (GD) Call Spread; Najarian Owns (GLD) Put Spread; Najarian Owns (JPM) & (JPM) Calls; Najarian Owns (MS) & (MS) Calls; Najarian Owns (MSFT) & (MSFT) Calls; Najarian Owns (ORCL) Call Spread; Najarian Owns (TGT) Call Spread; Najarian Owns (X) Call Spread; Najarian Owns (WFC) & (WFC) Puts; Najarian Owns (XHB) Call Spread; Najarian Owns (WDC) Call Spread; Najarian Owns (SMH) Calls

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