Halftime: Will Black Boxes Trigger Friday Sell-Off?

Investors seemed to be at a loss for moves on Friday with the Dow and S&P trading modestly lower; but with little conviction.

Perhaps that's because technicals favor the bears but fundamentals are reasonably bullish.

Who wins?

Instant Insights with the Fast Money traders

The market is trading on tehcnicals, says Steve Grasso of Stuart Frankel. And it has been for some time.

1087 is the important level on the S&P, it’s the 200-day moving average, he explains. We need to close above that level before I can feel bullish. Until that happens, rallies are selling opportunities, as far as I'm concerned.

I agree that the market is trading on technicals, adds Anthony Scaramucci of Skybridge. And there's worry they may come into play this afternoon; over the last 3 Friday’s we’ve seen black boxes kick in during the last hour of trade and take the market lower.

However, I think this may be the week that fundamentals trump technicals, he adds. We have lower oil , which is good for the economy and chatter suggests earnings numbers should be strong. I’d buy the close.

I’m not sure how long we have lower oil, adds Fast Money trader Joe Terranova. True the spot price is down but farther out the declines aren't as steep. Barclays put a note out today saying $100 oil is cheap and I agree.

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MAY RETAIL SALES

Not all fundamentals are bullish. New data from the Commerce Department out Friday showed retail sales plunged 1.2 percent last month, the largest decline in eight months.

What should you make of it?

Citi analyst Greg Badishkanian tells Fast Money he’s spoken with a large number of retailers and cautions investors not to paint all of them with the same brush.

Retailers that sell expensive products such as Harley Davidson are showing a sales drop-off.

But the natural organic food segment is seeing very strong growth, he says. In fact, the industry is growing in the high single digit range which is robust. I’m a buyer of Hain or United Natural Foods.

Personally, I don’t think we’re losing the consumer, I just think we’re in a soft patch, muses Joe Terranova.

But the trend in retail sales was negative, counters Steve Grasso. April was worse than March and May worse than April, he explains. That calls the strength of the consumer into question.

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CALL TO THE FLOOR: DOMINO’S

When it comes to the state of the consumer, who better to ask than Fast Money friend and CEO of Domino's Pizza, Patrick Doyle!

Get all the details. Watch the video now!

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BP’s DANGER ZONE

BP rallied for a second day in a row, with new chatter suggesting that oil giant may, in fact, be considering a dividend cut.

What should you make of it?

I think a dividend cut would gives shares a pop, speculates Anthony Scaramucci. It would suggest the company is very focused on directing money to the clean up.

Friday's move was triggered by chatter of the company’s break-up value and bidders coming into the stock, counters Steve Grasso, not a dividend cut.

I wouldn’t own BP, counsels Joe Terranova. I can’t help but wonder what happens if the relief well doesn’t work.

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Using the Exxon Valdez spill as a model, Brian Kelly of Kanundrum crunched some numbers for us and he estimates the gulf spill will cost BP $80 billion when all is said and done.

BP's Danger Zone
Exxon Valdez Liability: $40k/Barrel
BP Currently Spilling: 40k Barrels/Day
BP Per Day Liability: $1.6b
50 Days Of Spill: $80b in Liabilities
BP Market Cap: $100b
Source: Goldman Sachs/Kanundrum Capital

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CONTRARIAN CALL

Despite gains in the spot price, Citi issued a bearish note on nat gas Friday saying fundamentals haven’t changed. (Supplies of nat gas are currently above the 5-year average.)

What should you make of it?

I think Citi is missing something, says Joe Terranova. I think the spill in the gulf accelerates the conversation about converting the US to a nation powered by energy sources that are not oil

As an energy play I like Ormat for geo-thermal, says Patty Edwards of Storehouse. And I also like on-shore drillers, such as ERF .


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FAST FLASH: PFIZER

Pfizer was among the gainers in the Dow, Friday, after they announced positive results for an experimental drug. The news also gave a lift to Bristol-Myers, it's partner in the study.

What’s the trade?

With a it’s 4.7% dividend yield and trading around 16 times earnings, I like Pfizer stock, says Anthony Scaramucci. It’s value name and a defensive name. And I think it will soon become a growth stock.


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EAR TO THE WALL

According to the NYSE, the single-stock circuit breaker rollout will be completed by Wednesday. But as of Friday 5 stocks were already under the new rules in order to observe any issues that may arise.

They are:
EOG Resources (EOG)
Genuine Parts (GPC)
Harley Davidson (HOG)
Ryder System (R)
Zimmer Holdings (ZMH)

What should you know?

I expect it will work just fine, says Steve Grasso.

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CALL THE CLOSE

Anthony Scaramucci: I’d buy the close.
Patty Edwards: I’m hedged on the long market and a buyer of individual names.
Steve Grasso: We need to close above the 200-day moving average before I can see any of these rallies as anything other than a selling opportunity.

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Trader disclosure: On June 11, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Terranova owns (IPSU), (BX), (PFE), (RSX), (UDN), (TER), (AXP), (BMO), (BBY), (DIS), (XCO), (SWN), (GLD), (AAPL), (IPI), (SU), (V), (TEVA); Terranova owns UK Pounds; Terranova owns Euros; Terranova is short the US Dollar; Grasso owns (ABK), (BAC), (BGP), (C), (DYN), (JPM), (LPX), (NDAQ)

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 (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 Anthony Scaramucci
Scaramucci and Skybridge Capital own (JNJ)
Scaramucci and Skybridge Capital own (ESV)
Scaramucci and Skybridge Capital own (HAS)
Scaramucci and Skybridge Capital own (JPM)
Scaramucci and Skybridge Capital own (BAC)
Scaramucci and Skybridge Capital own (C)
Scaramucci and Skybridge Capital own (GS)
Scaramucci and Skybridge Capital own (HPQ)
Scaramucci and Skybridge Capital own (DELL)
Scaramucci and Skybridge Capital own (GOOG)
Scaramucci and Skybridge Capital own (SPY)
Scaramucci and Skybridge Capital own US Dollars

For Patty Edwards
Edwards owns (COH) for clients
Edwards owns (BKE) for clients
Edwards owns (JCG) for clients
Edwards owns (COST) for clients
Edwards owns (HD) for clients
Edwards owns (MS) for clients
Edwards owns (BAC) for clients
Edwards owns (JPM for clients
Edwards owns (C) for clients

For Steve Grasso:
Stuart Frankel & Co and it’s partners own (BAX)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (DHR)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HON)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (MERC)
Stuart Frankel & Co and it’s partners own (NWS.A)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PDE)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own (RDC)
Stuart Frankel & Co and it’s partners own (SYMC)
Stuart Frankel & Co and it’s partners own (TLM)
Stuart Frankel & Co and it’s partners own (TRV)
Stuart Frankel & Co and it’s partners own (XRX)
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners own (TBT)

Greg Badishkanian
Citigroup Global Markets Inc. or its affiliates has received compensation for investment banking services provided within the past 12 months from McDonald's Corp, YUM! Brands Inc., Royal Caribbean Cruises Ltd., Harley-Davidson Inc, Hasbro Inc, NutriSystem Inc.

Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as investment banking client(s): Jarden Corp, Smart Balance Inc, McDonald's Corp, YUM! Brands Inc., Royal Caribbean Cruises Ltd., Harley-Davidson Inc, Hasbro Inc, NutriSystem Inc.

Citigroup Global Markets Inc. or an affiliate received compensation for products and services other than investment banking services from Harley-Davidson Inc, International Speedway Corp, Smart Balance Inc, Burger King Holdings, Inc., McDonald's Corp, Domino's Pizza Inc., YUM! Brands Inc., Carnival Corp., Royal Caribbean Cruises Ltd., Polaris Industries, Hasbro Inc, Jarden Corp, Weight Watchers International Inc, Mattel Inc, NutriSystem Inc, Hain Celestial Group Inc, Lifetime Brands Inc in the past 12 months.

Citigroup makes a market in United Natural Foods Inc, Whole Foods Market Inc, International Speedway Corp, Mattel Inc, Smart Balance Inc, NutriSystem Inc, Hain Celestial Group Inc, Hansen Natural Corp, Lifetime Brands Inc.


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