Word On The Street
The stock market was hit with turbulence Thursday as news broke of the assassination of former Prime Minister Benazir Bhutto of Pakistan, more write-downs from the financials and a poor durable goods number. The Dow fell 192 points and the Nasdaq lost 47 points. Guy Adami thinks the path of least resistance is lower for the stock market. Pete Najarian said it was a perfect storm for the bears on Thursday with the assassination, poor durable goods and oil trading back towards $100. He recommended lightening up on some of the highly valued solar stocks. Karen Finerman mentioned the consumer confidence number came out and stronger than expected. She was surprised that retail stocks didn’t catch a bid off that strength. Adami highlighted strength in some consumer product names like Unilever plc (UL), The Procter & Gamble Company (PG) and Altria Group Inc. (MO). Goldman Sachs Group raised its write-down estimates for Citigroup Inc. (C), Merrill Lynch & Co. Inc. (MER) and JPMorgan Chase & Co. (JPM). Finerman explained that if she was running Citigroup she would cut the dividend by 40%. Adami again recommended U.S. Bancorp (USB) as the best way to play financials. Najarian likes Fannie Mae (FNM) and Freddie Mac (FRE). Crude oil trades to $96.62 on inventory numbers and off the Benazir Bhutto assassination in Pakistan. Najarian, Adami and Macke all like Tesoro Corporation (TSO). Oracle Corporation (ORCL) displayed some strength Thursday as Technology stocks were hit hard. Adami thinks Oracle is inexpensive and has more room on the upside. Najarian mentioned that Morgan Stanley says Oracle is their “Top Pick” for 2008. Apple Inc. (NASDAQ: AAPL) and News Corporation (NWS) closed a deal to rent Fox films through iTunes. Najarian says Apple will see some pressure through the end of the year as investors take some profits. Macke feels that Netflix Inc. (NFLX), Blockbuster Inc. (BBI) and Sony Corporation (SNE) will all be left behind in this wave of the digital revolution. Wall Street Journal columnist Walt Mossberg gave a great review to Dell Inc’s (DELL) new XPS One PC. Adami explained that Mossberg said the New Dell PC is Apple-like in its design and performance. Adami thinks Dell is worth owning here. Macke says the new Dell PC has more risk as a business model than before.
WORD ON THE STREET VIDEO
Financial Trade 2008
Brian Schaeffer, Van Der Moolen Capital Markets Managing Director, joined the “Fast Money” crew to discuss his take on the financials for 2008. Schaeffer is very worried with write-downs now up to $80 billion and predictions of $250 billion swirling around the Street. He thinks the way to trade the write-down problem is to short the Financial Select Sector SPDR Fund (XLF). Schaeffer mentioned that Citigroup Inc. (C) will trade down to $22-$25 and if you own the stock sell it. Najarian wasn’t as bearish and he says he likes the investment banks. He thinks the core numbers are Goldman Sachs Group Inc. (GS), Morgan Stanley (MS) and Lehman Brothers Holdings Inc. (LEH) were phenomenal, but he wouldn’t bottom pick the stocks.
FINANCIAL VIDEO
Drug Trade 2008
CNBC Pharmaceuticals Reporter Mike Huckman joined the “Fast Money” crew to discuss his take on the drugs stocks for 2008. Huckman explained that the FDA is expected to approve a new drug-coated stent from Medtronic Inc. (MDT) and in a few months they might approve another one from Abbot Laboratories (ABT). Huckman says this is a big deal because it will raise the competition in the drug-coated stent market. Huckman mentioned that the FDA is expected to make a decision on approval for Genentech Inc’s (DNA) breast cancer drug Avastin. Analysts are predicting that this approval would add $1 billion in revenue for Genentech. Najarian prefers Biogen Idec Inc. (BIIB) over Genentech. On a final note, Huckman advised investors to watch Dendreon Corporation (DNDN), which is set to release preliminary data on prostate cancer drug Provenge in the middle of the year. Huckman speculated that if the data shows Provenge extends the lives of patients it could receive FDA approval. Najarian says an approval would be huge and the stock could return to $20 if it happens.
DRUG VIDEO
Dennis Gartman’s 2008 Outlook
Dennis Gartman, author of The Gartman Letter joined the “Fast Money” crew to discuss his take for 2008. Gartman explained he continues to be bullish on gold and he thinks it will trade to $1000 in a year or two. He also thinks the uptrend will continue in the grain markets for wheat, corn and soybeans. Gartman mentioned he sold some Potash Corporation of Saskatchewan Inc. (POT) on Thursday into strength, but if the stock were to decline $10-$15 he would come right back and buy it.
GARTMAN VIDEO
POPS&DROPS
POPS- Freddie Mac (FRE) traded up 4% after the lender exceeded its capital requirements in the third quarter. Adami thinks the stock is going lower. Warner Music Group Corp. (WMG) traded up 2% after the record publishing firm added its catalogue to Amazon’s download service. Macke implied that a bottom could be forming here for WMG. Cirrus Logic Inc. (CRUS) traded up 4% after billionaire investor George Soros increased his stake to 4.6 million shares from 679,000 shares. Najarian doesn’t like the industry and feels the stock will drop on Friday.
DROPS- Noven Pharmaceuticals Inc. (NOVN) fell 1% after the firm received a tentative FDA approval for their new bipolar treatment Stavzor. Najarian explained a tentative agreement means nothing right now. Simon Properties Group Inc. (SPG) fell 3%. Finerman thinks SPG is safe short. Sallie Mae (SLM) fell 11% after the student loan lender announced a $2.5 billion stock sale. Macke says get out of this stock there is no bottom. The Boeing Company (BA) fell 1% off the drop in durable goods orders. Adami says the stock is cheap on a valuation basis around $88.
POPS&DROPS VIDEO
Final Trade
Macke says take a five-day weekend from the markets. Najarian recommended Archer Daniels Midland Company (ADM). Adami likes Intel Corporation (INTC). Finerman favors staying short the iShares Dow Jones U.S. Real Estate Index Fund (IYR).
FINAL TRADE VIDEO