TOPPING THE TAPE: HEALTH CARE
Health care stocks hit 52-week highs on Tuesday as investors watched a key Senate race in Massachusetts.
With early polls suggesting the Republican candidate will likely win Ted Kennedy’s seat, Pfizer , Merck and other health care giants soared higher.
If Democrats lose their 60 vote majority in the Senate, that, in turn, could call the entire health care reform bill into question.
What’s the trade?
It seems the HMO stocks are acting as if the Dems have already lost the race, muses Patty Edwards of Storehouse. But that aside, I think a lot of HMO stocks are screaming cheap just on fundamentals.
I’d wait for a correction before adding to my position, counters Jeff Tomasulo.
I’m watching Humana, Aetna, Cigna and UnitedHealth for unusual options action, adds Pete Najarian. Despite the run, the options market suggests to me these stocks may have room to the upside.
TAKE YOUR POSITION: IBM
With IBM set to report earnings after the bell on Tuesday, how should you be positioned?
Analysts on average expect IBM to report fourth-quarter revenue of around $27 billion, roughly flat from a year earlier, according to Thomson Reuters.
Profit per share is seen rising to $3.47 from $3.27 a year earlier, with full-year earnings of $9.88. The company has forecast earnings of at least $9.85 a share.
But the main focus will be on IBM's 2010 outlook. Bernstein Research analyst Toni Sacconaghi said he expects IBM to forecast "at least $11.00" for the full year.
"We note that IBM's playbook over the last two years has been to set achievable guidance and raise it," he said, citing IBM's record of beating consensus EPS in each of the last eight quarters and repeatedly raising guidance.
What’s the tech trade?
The volatility in IBM is coming in, says Pete Najarian. It seems like investors aren’t expecting a big move, either way.
In tech, I’m more interested in playing storage with EMC and VMWare, says Brian Kelly of Kanundrum.
It’s also worth noting, tech has been the laggard sector of 2010, reminds Melissa Lee. Take a look:
TECH WORST SECTOR OF 2010
Health Care +4%
Consumer Staples: +1.13%
Consumer Discretionary: +0.71%
(note: % as of Friday close)
It seems to me that companies will be putting money into tech a lot sooner than they will be adding bodies, speculates Patty Edwards. For that reason, I think tech has more room to run.
FAST FX: DOLLAR AND STOCKS COOPERATING AGAIN?
The Fast Money desk is closely watch the action in the US dollar after the greenback and the S&P 500 traded in tandem on Tuesday. Lately a stronger dollar has dragged down stocks.
Meanwhile, the euro fell broadly on Tuesday as Greece's finances kept pressure on that currency.
What’s the trade?
Things don’t look good on the other side of the pond, says Todd Gordon of Forex.com but the weakness is probably isolated to the euro group. If we get continued strength in tech I think we see interest rates go higher domestically; but dollar strength is best expressed against yen.
CALL THE CLOSE
Pete Najarian: I’d take profits.
Jeff Tomasulo: I think the market is in the top part of its range, I’m a seller.
Brian Kelly: I’m a buyer.
Patty Edwards: I’m a buyer of individual names.
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Trader disclosure: On January 19th, 2010, 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 Owns (AAPL); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM); Finerman's Firm Owns (BAC), (BAC) Leaps; Finerman Owns (BAC) Preferred, (BAC); Finerman's Firm Owns (WFC) Preferred; Finerman's Firm Owns (MCD), (MSFT), (YUM); Terranova Is Short (CMA), (ICE), (ESS), (JCI), (CAL), (AGU); Terranova Owns (QCOM), (MSFT), (DELL), (AAPL), (EMC), (FCX), (FTO), (XOM), (BAC), (JPM); Terranova Owns (POT) Feb. Puts; Terranova Owns (XHB) Mar. Puts
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