Will momentum take stocks higher or is a correction imminent?
It seems to me this market is all about asset allocation and money flow, muses Joe Terranova. We’re seeing funds coming into the market because underperformers are doing well. But be careful, some of the market leaders such as financials, energy and materials are starting to roll over.
I think we’re in a nice little zone right here, muses Tim Seymour, that is until we get second quarter earnings numbers which could be disappointing. That could be the catalyst that sends stocks lower.
FINANCIALS FALL ON MORE SHARE SALES
Bank stocks tempered broad market gains as investors sold off the sector on worries about the dilutive impact of recent stock offerings.
JP Morgan was among the top drags as they raised $5 billion in new capital from a secondary offering – a requirement to rid themselves from tight regulations stemming from TARP.
Preparing for TARP Payback
TARP Funds Total Common
Received Equity Raised
Bank of America $45 $25.9
Citigroup $45 $58
JP Morgan $25 $5.0
Morgan Stanley $10 $6.8
Goldman Sachs $10 $5.8
Source: Jeffery Harte, Sandler O'Neill
I know JPMorgan's $5 billion capital raise sounds like a lot of money, but it's really not a lot of money at all, explains Karen Finerman. It's really a small amount of their outstanding shares and I think the weakness is an opportunity to get in.
If you’re trading JP Morgan the secondary sets up a nice trade, adds Guy Adami. If you’re a bear I’d stop out above $35.35, he counsels and if you’re a bull I’d be a buyer above $35.25.
It seems to me the question in banks is… how fast can they get back to normalized earnings, muses Joe Terranova. And I’m not sure it's the same for all the big banks. I'm not certain how fast Bank of America can get there.
AFTER HOURS ACTION: AETNA
Health insurer Aetna cut its 2009 forecast on Tuesday, citing higher projected medical costs for its commercial business serving employers and lower revenue from its Medicare plans for seniors.
Aetna shares tumbled as much as 7 percent after hours.
I think the space is cheap on a relative basis, muses Karen Finerman, but the X factor is the Obama administration and what they’re going to do in the healthcare space going forward.
AFTER HOURS ACTION: JETBLU
Shares of JetBlue fell more than 6 percent in extended trading on Tuesday after the airline announced the proposed offering of 20 million shares of common stock.
If you’re bearish crude, I think the trade is getting long JetBlue around the secondary price.
TOPPING THE TAPE: CONSUMER SHARES
An upbeat report on sales of previously owned U.S. homes bolstered hopes for an economic recovery and sent consumer shares higher.
An index of pending sales of previously owned U.S. homes shot up 6.7 percent in April, the biggest monthly gain in 7-1/2 years, according to the National Association of Realtors.
I think the trade is long Mastercard if it pulls back to $150, says Guy Adami.
I’m short the SPDR S&P Retail , reveals Karen Finerman, but so far that hasn’t worked at all.
I would not be a buyer of most consumer names, says Joe Terranova. In fact I’d be looking to get short.