Strategy Session with the Fast Money Traders
Consumer confidence as a catalyst to spark a rally doesn’t make sense to me, explains Karen Finerman. It’s not about inventories or housing numbers, it’s just about how people feel.
I also wouldn’t get that excited about Tuesday’s rally, adds Tim Seymour. At some point the data may not back up the feeling.
It seems to me that once again we find ourselves right where we’ve been for the past 2 months, adds Guy Adami. It feels like we’re trading sideways.
It's true that the fundamentals are not there to support the rally, muses Joe Terranova. In fact the momentum defies logic -- but it doesn’t make sense to fight the momentum.
CONSUMER CONFIDENCE JUMPS MOST IN 6 YEARS
New data released Tuesday showed U.S. consumer confidence soared in May to its highest level in eight months. The Conference Board, an industry group, said on Tuesday its index of consumer attitudes jumped to 54.9 in May from a revised 40.8 in April, the biggest one-month jump since April 2003.
Economists had been looking for a much smaller rise to 42.
The data was in line with other evidence suggesting that, while the economy continues to contract in the current quarter, the pace of deterioration has abated somewhat.
If you're looking for consumer plays, I’d look at the Gap, counsels Guy Adami. I think it’s pushing against resistance but it’s a buy on a dip. Also keep an eye on Mastercard , he adds. I think it trades down to $150 and when it does – it’s a buy.
For me I’d go with a pairs trade; I’d be long Wal-Mart and short the SPDR S&P Retail Index , counsels Karen Finerman.
HOMEBUILDERS SHAKE-OFF PRICE PLUNGE
Homebuilder stocks popped higher despite new information which showed prices of single-family homes in March fell 18.7 percent from a year earlier. However the same data also offered some bullish insights -- the pace of decline slowed for a second consecutive month.
New home sales and new home construction are things the market is hoping to see go lower, explains Tim Seymour. That would be better overall for the economy. So I’d be wary of the homebuilders.
I think homebuilders are lottery tickets, adds Guy Adami.
TOPPING THE TAPE: APPLE LEADS TECH HIGHER
Shares of Apple's closed nearly 7 percent higher driving sharp gains on the Nasdaq. The move was largely sparked by an upgrade from Morgan Stanley to "overweight."
"The core of our stock call is that the iPhone's success and higher margins will begin to mute the fundamental margin and growth risks in Apple's core Mac/iPod businesses," analyst Kathryn Huberty wrote in a note to clients.
The analyst, who raised the price target on the stock to $180 from $105, said the market is underestimating iPhone unit demand in the second half of 2009 and 2010 which will accelerate earnings growth, estimate revisions and multiple expansion.
As long as the S&P 500 holds it’s upward momentum, I think it’s okay to be long Apple as well as RIMM , Google and IBM, counsels Joe Terranova.
If you’re trading tech, Intel keeps hitting support at $15, reminds Guy Adami. Also I’d look at Red Hat. There’s speculation that IBM might be interested in this company as a takeover target.
In the space I like Nokia , adds Karen Finerman.
JPMORGAN RALLIES INTO THE CLOSE
Shares of the nation’s largest banks rallied into the close with JPMorgan among the financials making a sizable jump.
New accounting rules may help JPMorgan profit from bad loans it absorbed when it acquired Washington Mutual, explains Joe Terranova. That might account for the move higher. (The rules would apply to all banks including Wells Fargo and others.)
At these levels, it’s hard for me to get bullish financials as an initiation trade, explains Guy Adami. If it runs, then I’ve missed it -- but to get long now doesn’t make sense.
Also, there were a new accounting rules introduced on Tuesday pertaining to bad loans, adds .
OIL REBOUNDS AFTER DIPPING BELOW $60
U.S. crude oil futures ended more than 1 percent higher on Tuesday after hitting a fresh 2009 intraday high, as a report of higher consumer confidence bolstered hopes of improved oil demand.
Considering inventories are high and demand is tepid at best, the fundamentals do not support oil at $62, explains Fast Money commodity trader Joe Terranova.
But momentum is driving crude right now – not fundamentals. And there’s clearly paper demand for oil as an asset, Terranova explains.
With so much resiliency in the face of otherwise negative influences, stay with the trade that’s working. For the time being, that’s a bet on oil prices going higher.
SECTOR TRADE: STEEL
Steel producers Nucor and US Steel both closed higher on Tuesday on hopes that an economic recovery could soon be at hand.
It’s a head scratcher, admits Tim Seymour. The fundamentals in steel really don’t look that good to me.
If you have a long-term view, at least a year, then United States Steel might make sense, counsels Guy Adami. But don’t buy it as a fast money trade – it’s too early.
GOLD MISSES THE PARTY
U.S. gold futures slipped Tuesday as a stronger dollar and better economic sentiment prompted a bout of profit taking following last week's solid gains.
I don’t see any reason to jump off this trade, counsels Joe Terranova. Again, it’s all about the momentum.
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