Word On The Street
Melissa Lee hosted CNBC “Fast Money” show Wednesday night. She started the show with a discussion of how the market has hit levels not seen before during the current global financial crisis. Jeff Macke said today confirmed that General Motors (GM) CEO Rick Wagoner has no plans for bankruptcy. “He had no plans for an economic downturn, no plans for high oil prices and he had no plans for the recession that we are in today,” he said. Pete Najarian said since the bailout package was introduced, the financials have done nothing but go lower. “There is a big bear in front of us right, and we need to get this thing turned,” he said. Guy Adami told viewers that if the Dow trades to 7800 tomorrow it will not stop next time. He says “we could easily now see a 6-handle on the Dow.”
Financial Talk
Lee moved the conversation towards the financial sector. She pointed out that Citigroup (C) hit its lowest level in over 13 years. Najarian said Citigroup has issues everywhere right now. Adami explained that even the good financial stocks such as JPMorgan Chase (JPM) and U.S. Bancorp (USB) are being sold.
Chart of the Day
The “Chart of the Day” was Goldman Sachs Group (GS), which broke the $60-level. Adami said he would love to defend Goldman but he can’t. He says “the stock is telling you something bad is going on.” Najarian told viewers that Merrill Lynch (MER) had some incredible put activity today. “They were buying the November $10 puts and the December $10 and $7 puts,” he explained. Finerman mentioned that BB&T (BBT), which she is short, received $3.1 billion of TARP money and they paid $1 billion in dividends last year. “That’s ridiculous, that the only string on the TARP money is that they can’t raise the dividend,” she said.
Big Three
Lee switched the discussion to the big three automakers. Macke said the testimony of the big three in front of the House of Representatives was embarrassing. He says “I am short Toyota Motors (TM) which has some meat left on the bone.” Najarian said the other issue is the $40 billion annually the automakers spend on advertising. He pointed out that Google (GOOG) hit a new low and it could be because market is anticipating a major cutback in online ad spending from the big three.
Consumer Sector
Lee pointed out that consumer names took a major beating today. Adami said if you’re looking for a capitulation day, you might have seen it with shares of Target (TGT). Macke said if you think that Target is going to be broken up into a “real estate play,” than just look at the chart of Sears Holdings (SHLD). Najarian mentioned that Best Buy (BBY) saw an enormous amount of put activity today. Adami pointed out that Church & Dwight traded up in the weak tape.
Tech Take
Lee moved the conversation to Microsoft (MSFT), which hit a 10-year low and Yahoo! (YHOO), which hit a 5-year low. Macke mentioned that everyone who had a brain at Yahoo left to go to Google. Najarian said the slowdown online is hitting Yahoo faster than anyone had anticipated.
Dennis Gartman Chat
Strategic investor Dennis Gartman, author of The Gartman Letter joined the traders to discuss the economy. He said we have to be careful about deflation, because we don’t know how far it can go down, plus once it starts everybody’s net worth diminishes. “We can throw as much money at it as we want, but that hasn’t been working,” he said. Gartman told viewers that people are going to start saving more which will create inflation and depression type circumstances. He says “gold has had every reason to go up, but it’s not rallying.” He also mentioned the Forex market is seeing moves in just a few hours that it use to take years to make.
Commercial Crisis
The traders discussed the growing fears that defaults might spike for commercial mortgaged-backed securities. Finerman said the commercial real estate problem is not over by a long-shot. She says “anything that has commercial real estate exposure such as Simon Property Group (SPG), Vornado Realty Trust (VNO), BB&T (BBT) and HCP (HCP) sold off a lot and that’s part of the reason Citigroup sold off.” She told viewers she didn’t cover any of her shorts in the sector. Adami told viewers that commercial-lighting fixture makers such as Philips Electronics (PHG) and Acuity Brands (AYI) might have more room on the downside. Najarian mentioned that traders bought lots of January $23 puts on the iShares Dow Jones US Real Estate ETF (IRY). He says “the bottom has yet to be found.”
Lame Duck Game Plan
Joe Terranova, of Virtus Investment Partners joined the traders to layout his game plan for the rest of the lame duck session. He said right now the market looks like it’s going to fall through 7800. However, Terranvoa sees some fundamental stories that could be winners. He said Exxon Mobil (XOM) and Chevron (CVX) are hanging in and trading at levels attractive levels. He also likes names such as Burlington Northern Santa Fe (BNI) and Walt Disney (DIS). Terranova told viewers he doesn’t want to trade crude oil futures right now. “The problem with ConocoPhillips (COP) is that it has a touch of oil refinery exposure and natural gas exposure,” he said. He says “for whatever reason, Exxon Mobil just isn’t going down.”
Trader Radar
Shares of Royal Caribbean (RCL) were among the most active names on the NYSE Wednesday.
POPS&DROPS
Drops- AstraZeneca (AZN) plunged 12% after the drug maker announced it revised its forecast. Najarian explained that the problem is AstraZeneca has some big generic competition for one of its billion dollar drugs. Freeport McMoRan (FCX) dropped 6% after JPMorgan cut its estimates on the commodity name. Adami says “it’s just not working out on FCX right now.” Capital One (COF) traded down 9%. Finerman explained that Capital One has big credit card exposure and a big auto loan book. She says “neither place is where an investor wants to be right now, short COF.” Royal Caribbean Cruises (RCL) lost 17%. Macke joked “the combination of a bad economy and the revival of pirates was enough to send this thing lower.” Aloca (AA) fell 14% after JPMorgan cut its 2009 estimates for the aluminum maker. Adami said “not good.” Sunoco (SUN) plunged 12% after Deutsche Securities downgrade the stock from hold to sell. Finerman mentioned she is unfortunately the owner of some of this stock.
Final Trade
Adami picked McDonald’s (MCD). Finerman said cover some shorts on the SPDR Trust (SPY). Najarian said Home Depot (HD) and Lowe’s (LOW) have an opportunity to the upside. Get the scoop on tomorrow’s hottest trade ideas – TODAY! BeaconEquity.com PREMIER PICKS have an amazing track record. Join this select group and ride the profit wave!