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After Hours Action: Yahoo!

Shares of Yahoo! jumped as much as 3% in post-market trade, after the Internet search firm reported a profit that was higher than last year – and one which zoomed past expectations.

Investors didn’t seem to mind that the earnings improvement was primarily driven by extensive cost cutting and not top line growth.

The Web portal and online search company said it earned 13 cents a share in the third quarter, up from 9 cents a share in the same period last year.

These results suggest the changes implemented by CEO Carol Bartz are starting to gain traction, muses CNBC’s Jim Goldman. The question becomes -- are they sustainable?

Behind The Numbers: Yahoo! Search Advertising Estimates
Estimates Q/Q: -7%
Estimates Y/Y: -13%
Actual Q/Q: FLAT |
Actual Y/Y: -12%
-Jeff Lindsay, Sanford Bernstein

What’s the trade?

I think Yahoo! is a buy on any pullback, says Guy Adami. It should be a $20 stock

I’m bullish Yahoo, says Pete Najarian, but I also hold some puts for protection.

> For complete coverage of Yahoo! earnings click here

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STRONG EARNINGS CAN’T BOOST MARKET

The S&P retreated from 12-month highs on Tuesday despite some upbeat earnings from a number of Dow components including Caterpillar , which completely blew away expectations.

Cos. Topping Street Estimates Today
BlackRock
Lockheed Martin
Coca-Cola*
Caterpillar*
DuPont*
Pfizer*
State Street
UnitedHealth
United Technologies*
* Dow Members

Instead disappointing housing and inflation data prompted investors to book recent gains.

What do the traders make of it?

The market had every reason to go up on Tuesday and it didn’t, says Karen Finerman. But the Vix continues to come in. That says to me there’s no panic out there. It also says to me there’s money on the sidelines that just needs to come in.

The S&P is 20% over the 200-day moving average, reminds Tim Seymour. That’s something I’m following closely.

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CATERPILLAR SMASHES ESTIMATES

As we mentioned above, machinery maker Caterpillar posted stronger-than-expected quarterly earnings on Tuesday and raised its full-year forecast, saying it was seeing signs that a recovery may be under way.

The world's largest maker of construction and mining equipment and a closely watched component of the Dow Jones industrial average reported a third-quarter net profit of $404 million, or 64 cents a share, compared with $868 million, or $1.39 a share, a year earlier.

"While we are still navigating through a very difficult environment in 2009, we see signs of improving economic conditions throughout most of the world," Chief Executive Officer Jim Owens said in a statement.

What’s the trade?

Caterpillar is trading 30 times forward earnings, muses Guy Adami. I have to believe that’s rich. I’d pull the ripcord.

I think Caterpillar is in the sweet spot, counters Tim Seymour. They benefit as India and China spend on infrastructure as their stimulus plans take effect.

I like Flowserve much better, counters Karen Finerman, simply for valuations.

Bucyrus and Terex report results later in the week, adds Pete Najarian. Keep an eye on those two names. I want to see what they say about growth before I’d make any strong decisions based on Caterpillar.

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MARKET MOVER OF THE DAY: APPLE

Brokerages lifted their price targets on Apple Tuesday, with UBS looking at $280, after the firm’s quarterly results trounced Wall Street forecasts.

Apple on Monday said sales of Mac computers -- the largest single contributor to Apple's revenue -- jumped a better-than-foreseen 17 percent in the quarter ended Sept. 26, even as shipments of the closely watched iPhone were held back by problems in producing enough to meet demand, particularly abroad.

Morgan Stanley analyst Kathryn Huberty believes the market is underestimating the earnings power of the iPhone. "We view the combination of new product launches, broader distribution and more attractive pricing as demand drivers over the next two years," Huberty says.

Meanwhilel analysts at UBS believe the iPhone will continue to see greater "recurring" iPhone hardware revenue, which should drive more visibility into iPhone sales, as well as iPhone expansion driven by new partnerships.

Separately, J.P.Morgan Securities' analyst Mark Moskowitz said he expects increasing revenue growth out of Apple in the first quarter of 2010, driven by sustained momentum in Mac and iPhone.

The table below lists the price target changes:

New Old
UBS 280 265
RBC 275 250
Caris 260 235
Deutsche 250 225
Canaccord Adams 250 200
Barclays 235 208
Oppenheimer 235 210
Morgan Stanley 230 210
Susquehanna 221 210
JP Morgan 220 210

What’s the trade?

I think you can short Apple with a stop around $202, says Guy Adami. On a down tape I think it moves lower.

I agree with Guy, adds Pete Najarian. I wouldn’t chase this stock because if the market slides Apple should go with it. But I am a buyer on a pullback.

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MARKET BUZZKILL: COKE DISAPPOINTS

Shares of Coca-Cola closed lower after the firm reported worse-than-expected quarterly revenue, hurt by the stronger U.S. dollar, and said a weak economy would keep consumers under pressure next year.

"We expect the consumer to continue facing economic uncertainties into 2010 and for consumer sentiment to recover slowly," Chief Executive Muhtar Kent said. He added, however, that the company remains on track to achieve its long-term growth expectations.

What’s the trade?

I thought the numbers were good, says Tim Seymour. I especially like the exposure they have overseas.

In the space, if I had to pick between Coke and Pepsi I’d go with Pepsi for valuations, counters Karen Finerman.

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THE NEXT BIG COMMODITY TRADE?

Shares of companies in the materials sector declined as commodity prices fell. The Reuters/Jefferies CRB commodity index was off for the first time in seven sessions and crude oil settled lower for the first day in nine.

However one bright spot in the sector was nat gas which closed higher for the 4th consecutive day and is now trading at its highest level since January.

What’s the trade?

It seems to me there’s some return for gas demand, says Tim Seymour. I think there’s room to run.

My favorite energy play is Apache , adds Guy Adami. I think that’s the way to go.






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Trader disclosure: On Oct. 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 Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Finerman's Firm Owns (BAC) Preferred, (BAC) Call Spreads, (BAC); Finerman Owns (BAC) Preferred, (BAC); Finerman's Firm Owns (BKS) Puts, Is Short (BKS); Finerman's Firm Owns (MSFT); Finerman's Firm Owns (TGT); Finerman's Firm Owns (UNH) Calls; Finerman's Firm And Finerman Own (WFC) Preferred; Finerrman's Firm And Finerman Own (WMT); Finerman's Firm Is Short (UNG), (IJR), (MDY), (SPY), (IWM), (USO); Finerman Owns (AAPL); Najarian Owns (BX) Call Spread; Najarian Owns (GE) Calls; Najarian Owns (LAZ), Is Short (LAZ) Call, Owns (LAZ) Puts; Najarian Owns (MGM) Calls; Najarian Owns (STX) Call Spread; Najarian Owns (XLF) Call Spread; Najarian Owns (YHOO), Is Short (YHOO) Calls; Najarian Owns (TEX) Call Spread; Finerman's Firm And Finerman Own (FLS); Finerman's Firm Owns (DRI); Seygem Asset Managemnet Is Short (PBR); Seygem Asset Management Is Short (EWZ); Seymour Owns (CHL), (EWZ), (AAPL), (BAC), (CAT), (MGM)

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