STOCKS SLIDE AFTER 6-WEEK RALLY, FINANCIAL FEARS RETURN
The Dow plunged by triple digits on Monday as concerns about the banking industry’s health sent investors scrambling for the exits.
Bank of America largely triggered the sell-off after it warned of worsening loan default problems even as it posted a first-quarter profit of $2.81 billion.
Sentiment was also dragged down by a report in The New York Times which said the White House and the Treasury Department could avoid having to ask for more money beyond the $700 billion already allocated for the government's bank rescue fund by converting the government's loans into common stock.
Such a move would give the government a controlling stake in banks and dilute shareholder value substantially.
Meanwhile, shares of Citigroup plunged after Goldman Sachs said credit losses at the bank continued to grow at a rapid rate and estimated the bank's underlying first-quarter loss was 38 cents a share.
"People are starting to peel the results back and say wait a second," says Joe Saluzzi, co-manager of trading at Themis Trading. "Can (the results) continue in the next quarter?"
Strategy Session with the Fast Money Traders
I think that New York Times report mentioned above spooked investors, says Karen Finerman. Considering the run, it made sense to take profits.
It makes sense to me that investors took profits on the moves, too, adds Pete Najarian. Some of these stocks have moved substantially. What else would you expect?
I’m in a quandary, says Guy Adami. I think we’re in no-man’s land because we didn’t get to 900 in the S&P before this turn lower. And if you’re looking at Bank of America, I like it around $7.10.
AFTER HOURS ACTION: IBM POINTS TO MORE LOSSES TUESDAY
After the closing bell, IBM reported a bigger-than-expected fall in quarterly sales, showing that even one of the healthier U.S. technology companies was being hurt by a slowdown in spending. IBM's stock fell 3 percent to $97.47 in extended trade.
Historically IBM trades with a 15 multiple but now it’s closer to 10, and in this environment even that’s rich, says Guy Adami. But I do think it’s worth about $100 - $120 a share.
Joe Terranova agrees. I think it’s a $120 stock by the end of the year.
CNBC’s Jim Goldman agrees, too. He says it could be a $120 even $130 stock. And he adds IBM is probably on the acquisition path. Watch for that.
Speaking of mergers and acquisitions, Oracle Corp said it would buy Sun Microsystems Inc for about $7.4 billion after Sun's talks with IBM broke down earlier this month.
I think the pullback is an opportunity in Oracle, muses Pete Najarian. I really like Oracle at these levels. IBM is worth a look too, but I’d wait for a pullback.
AFTER HOURS ACTION: TEXAS INSTRUMENTS
Texas Instruments posted a small quarterly profit but better than expected revenue as demand for its chips seemed to stabilize, though it emphasized "caution about the business climate".
This news is very surprising, explains CNBC’s Jim Goldman. The beat is significant. It could signal a good back half to 2009.
I wouldn’t run in and buy this stock, counsels Guy Adami, but the results could bode well for the wireless world.
In this space, I’m keeping my eye on Cisco, adds Pete Najarian. On a pullback I think it’s a buy.
DOLLAR STRENGTH POUNDS COMMODITIES
The dollar hit a one-month high against a basket of currencies on Monday as sharp drop in stocks prompted investors to seek the perceived safety of the U.S. currency. As a result the strong dollar sent commodities tumbling with crude sharply lower
The move in commodities was far greater than the move in the currency, explains Karen Finerman. Commodities had come too far too fast and the euphoria ended. That’s all that happened. I’d be a buyer of the OIH a little bit lower.
I think investors should shift out of energy futures into the energy equity names, counsels Joe Terranova.
In commodities, I’m keeping an eye on copper, counsels Guy Adami. despite recent weakness, I expect to see it still move higher bur remember commodities take the stairs up and the elevator down.
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Trader disclosure: On Apr 20th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders;Najarian Owns (CX) Call Spread; Najairan Owns (MCD) And Is Short (MCD) Calls; Najarian Owns (PALM) And Is Short (PALM) Calls; Najarian Owns A (YHOO) Call Spread; Najarian Owns (RF) Call Spread; Najarian Owns (PCU) Call Spread; Najarian Owns (AMLN) Calls; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Finerman Owns (AXP); Finerman's Firm Owns (PBR), (CSCO); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO), (USO); Finerman's Firm And Finerman Are Short (BAC) And Own (BAC) Preferred Shares; Finerman's Firm Owns (WFC) Preferred Shares And Is Short (WFC), Finerman Owns (WFC) Preferred Shares
Terranova Works For (VRTS); Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.; Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO; Terranova Owns (MS), (DELL), (IBM), (BP), (DIS), (INTC); Terranova Owns (COP) Calls, (DIS) Calls, (XOM) Calls
Terranova Owns (HES) And Is Short (HES) Calls; Terranova Owns (BRCM) And Is Short (BRCM) Calls; Terranova Owns (IBM) And Is Short (IBM) Calls; Terranova Owns (JOYG) And Is Short (JOYG) Calls; Terranova Owns (JPM) And Is Short (JPM) Calls; Terranova Owns (INTC) And Is Short (INTC) Calls; Terranova Owns (POT) And Is Short (POT) Calls; Terranova Owns (WYNN) And Is Short (WYNN) Calls; Terranova Owns (X) And Is Short (X) Calls; Terranova Owns (XOM) And Is Short (XOM) Calls; Terranova Is Short NYMEX June Crude Oil
Virtus Diversifier PHOLIO Owns (IGE), (DBC), (DBV)
Virtus Investment Partners Owns More Than 1% Of (ABD), (ARE), (CAL), (DLR), (EPR), (EXR), (IGE), (MAC), (MEE), (DBC), (DBV), (SKT), (UA), (CLB), (WBMD); Virtus Investment Partners Owns More Than 1% Of Blackrock Liquidity Funds FedFund Portfolio; Virtus Investment Partners Owns More Than 1% Of Corporate Office Properties Trust SBI MD; Virtus Investment Partners Owns More Than 1% Of St Mary Land & Exploration Co; Virtus Investment Partners Owns More Than 1% Of Seagate Tax Refund Rights; Virtus Investment Partners Owns More Than 1% Of Goldman Sachs Financial Square Fund – Money Market Fund
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