Strategy Session with the Fast Money traders
It’s hard to look at this action and not be a little afraid, says Karen Finerman. But I boughtHewlett-Packard because I don’t think anything is dramatically different today that makes this company any different.
If you’ve read the latest earnings releases you’ll see a strong global recovery is a part of most outlooks, says Gary Kaminsky. But that can’t be possible if Europe is in such a fragile state. The potential ripple is concerning.
I’m getting aggressive on the short side, reveals Brian Kelly of Kanundrum. I think troubles spread and as a result I sold Deere and Nucor.
If the contagion spreads investors will begin to ask themselves which companies have the most exposure to Europe, says JoeTerranova.
The following list was compiled by S&P and shows US firms with sales generated in Europe between 2003 – 2008. These may be the companies that could feel the most pain next earnings season, reminds host Melissa Lee, due to the weaker euro.
Company *% Sales From
**Schering-Plough 48%
Flowserve 47%
Paccar 47%
Owens-Illinois 44%
Pall Corp 43%
Source: S&P
*Sales between 2003-2008
** Schering Plough was acquired by Merck
*CNBC’s Steve Liesman sees it a little differently. He says although we can't ignore what's happening in Europe we can overstate it. "We can do okay with a European slowdown. It's not going to be critical for the US economy. It's an individual corporate story but I don't think it's a macro story," he says.
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CURRENCY PLAYS: EURO VS. DOLLAR
Fears of contagion, sent the euro to a one-year low against the dollar, on Tuesday, with investors seeking safe haven in the U.S. currency.
Can the euro really fall much more?
I think we’re looking at the next leg lower in the euro, says Gary Kaminksy. There’s nothing that’s happening on the continent that would suggest we’d see any strength.
A lot of investors say the euro can’t fall any farther but I say it can, echoes Guy Adami. I think the euro is going to 1.25.
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COMMODITIES RIPPLE
Meanwhile, the strong dollar dragged down commodities such as oil , and copper . In turn natural resource names such as Freeport McMoRan also slipped.
What’s the trade?
Earlier in the year, hedge funds went long natural resource names as a bet on a weaker dollar, explains JoeTerranova. But considering the recent developments in Europe, that trade probably won’t work out.
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SELL-OFF BREAKDOWN: APPLE LEADS NASDAQ SLIDE
Apple led the Nasdaq lower with the entire tech sector largely punished by investors.
What does the tech sector have to do with Europe?
Tech has nothing to do with Europe, says Gary Kaminksy. Investors sold tech on Tuesday because they wanted to lock in profits and this is where they had gains. Technology is over-owned.
Another reason for the tech drop could be too much enthusiasm, explains host Melissa Lee. There is nearly four times as much money invested in the Rydex Nasdaq bull fund than the Nasdaq 100 bear fund, according to the Sentiment's Edge blog. The current ratio is among the highest in the history of these funds.
As I mentioned above I bought HPQ, says Karen Finerman and if IBM comes in a few more dollars I’d be a buyer of than name too. Both companies are solid.
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AFTER HOURS ACTION: INTERMUNE
In extended trade shares of InterMune plunged over 70% after the FDA did not approve its drug to treat lung scarring.
Instead the government requested an additional clinical trial to support the efficacy of the drug.
What must you know?
Although it’s a setback, Brian Skorny of ThinkEquity says InterMune may be a takeover target. And the drug may ultimately make it through.
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Trader disclosure: On May 4, 2010, 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 (PFE); Najarian Owns (GS) Calls; Najarian Owns (MS); Najarian Owns (C) Calls; Najarian Owns (SFD) Calls; Najarian Owns (TEVA); Adami Owns (AGU), (C), (INTC), (GS), (NUE), (MSFT), (BTU); Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (USO); Finerman's Firm Is Long S&P Puts; Finerman Owns (AAPL); Finerman's Firm Owns (AEO), (ARM); Finerman Owns (BAC), (BAC) Preferred; Finerman's Firm Owns (BAC), (BAC) Calls; Finerman's Firm And Finerman Own (CVS); Finerman's Firm And Finerman Own (JPM); Finerman's Firm And Finerman Own (RIG), (RIG) Calls; Finerman's Firm Owns (WFC) Preferred; Terranova Owns (PFE), (SWN), (XCO), (TER); Terranova Owns (C) May Calls; Terranova Is Long Gold June 2010 Futures; Terranova Is Short (CMA); Edwards Owns (VXX); Kelly Owns (FXE) Puts; Kelly Owns (FXB) Puts; Cortes Is Long Treasuries; Cortes Is Long U.S. Dollar; Nations Owns (SPY)
For Joe Terranova
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (DRYS)
For Whitney Tilson
Funds Managed By Whitney Tilson Own (BUD)
Funds Managed By Whitney Tilson Own (BRK.A)
Funds Managed By Whitney Tilson Own (BRK.B)
Funds Managed By Whitney Tilson Own (MSFT)
Goldman Sachs Is A Prime Broker For Funds Managed By Whitney Tilson
For Anthony Scaramucci
Scaramucci Owns (WMT), Skybridge Owns (WMT)
Scaramucci Owns (PFE), Skybridge Owns (PFE)
Scaramucci Owns (MRK), Skybridge Owns (MRK)
Scaramucci Owns (GS), Skybridge Owns (GS)
Scaramucci Owns (MS), Skybridge Owns (MS)
Scaramucci Owns (JPM), Skybridge Owns (JPM)
For Patty Edwards
Edwards Owns (SPY) For Clients
Edwards Owns (QQQQ) For Clients
Edwards Owns (WMT) For Clients
Edwards Owns (PFE) For Clients
Edwards Owns (MRK) For Clients
Edwards Owns (BMY) For Clients
Edwards Owns (AAPL) For Clients
Edwards Owns (MS) For Clients
Edwards Owns (JPM) For Clients
Edwards Owns (BAC) For Clients
Edwards Owns (C) For Clients
Edwards Owns (WFC) For Clients
Edwards Owns (EEM) For Clients
Edwards Owns (GLD) For Clients
Edwards Owns (PGM) For Clients
For Brian Kelly
Kanudrum Capital Is Long U.S. Dollar
Kanudrum Capital Owns (TLT)
Kanudrum Capital Owns (GLD)
Kanundrum Capital Owns (GFI)
Kanundrum Capital Owns (AUY)
Kanundrum Capital Is Short (DE)
Kanundrum Capital Is Short (NUE)
Kanundrum Capital Is Short (FDX)
Kanundrum Capital Is Short (XOM)
Kanundrum Capital Is Short (HES)
Kanundrum Capital Is Short (IBM)
Kanudrum Capital Is Short Euro
Kanudrum Capital Is Short British Pound
Kanudrum Capital Is Short Yen
Kanudrum Capital Is Short Swiss Franc
CNBC.com with wires
