Word On The Street
Melissa Lee hosted CNBC “Fast Money” show Friday night. She began the show with a discussion of how the S&P 500 rallied off 11-year lows following the news that President-elect Barrack Obama would name Tim Geitner to head the Treasury, and that he will roll-out the rest of his “economic team” on Monday. Jeff Macke said the news on Geitner wasn’t anything new if you’ve been watching “Fast Money” lately. Karen Finerman said the market was so oversold that anything could have set it off to the upside. Guy Adami told viewers that Pete Fisher will be named next to head the New York Federal Reserve. Zacharay Karabell explained that the rally was really due to Bill Richardson being named the next Commerce Secretary chief.
Obama’s Team
Lee asked the traders who else could be named to Obama’s economic team to continue the rally on Monday. Finerman said Lawrence Summers and Paul Volker could be bullish for the markets. She also mentioned that Citigroup (C) is a proxy for the U.S. financial system, and if it opens weak on Monday it will show we need more done. Macke said Citigroup not imploding Monday morning would be good for the market. Karabell explained that this was incredibly quick for Obama to name his full economic team. “Citigroup is not out of the woods,” he said.
Big Movers Of The Day
Lee moved the discussion to some of the big gainers in the market such as Alcoa (AA), Disney (DIS) and Microsoft (MSFT). Adami mentioned he thought we would see a 6-handle on the Dow today. “The fact that we rallied without a washout makes me concerned,” he said. Karabell pointed out that the global markets stabilized today. Macke said it was too easy on the short side and this rally was overdue. Adami told viewers to look at Target (TGT). He says “it closed the day unchanged in a pretty decent tape, the move was yesterday.” He also noted that Gap Stores (GPS) soared 27% today. “Gap looks okay, and Target for a long term trade looks okay,” he said. Macke said Dell (DELL) looked miserable again.
Fate of Citi
Lee switched the conversation to Citigroup (C). She mentioned that some people in the market are saying that come Monday, Citigroup might not exist like we know it today. Macke said whatever is going on at Citigroup isn’t good for shareholders. Karabell told viewers that he bought more Citigroup at $3.40 a share. Finerman said she thinks the government will not let Citigroup go under. “They could merge with Goldman Sachs Group (GS),” she said.
Chat of the Day
The “Chart of the Day” was the 3-month Treasury bill. Adami said there was a flight to quality today in gold, but he doesn’t trust the move. Macke said he would rather be long the dollar than gold.
Terranova Talk
Joe Terranova, chief alternative strategist for Virtus Investment Partners joined the traders to discuss why the market rallied off Obama’s economic team appointments. He explained that the market wants certainty and leadership. Terranova said the next move in the leadership change will be for the SEC Chairman. He pointed out that three key fundamental reversals are occurring for energy prices, the dollar and interest rates that will take hold as we head into 2009. Adami said Eric Dinallo will get the job next as SEC Chairman. Terranova told viewers that Disney is a tremendous opportunity for the longer term.
Next For Citi
CNBC’s Charlie Gasparino joined the traders to discuss the fate of Citigroup (C). Gasparino said Citigroup could merge with Morgan Stanley (MS) or Goldman Sachs Group (GS). “Their options are very limited and sources inside the company are telling me they don’t know what to do,” he said. Gasparino mentioned that there are very limited choices for replacing Citigroup CEO Vikram Pandit. He says “the problem here is that Citigroup has been a slow moving train wreck for over two years.”
New Treasury
The traders spoke with CNBC’s Steve Liesman about Obama’s choice for Treasury Secretary. Liesman said Geitner will provide continuity and he when he doesn’t know something, he won’t say anything. He mentioned that Geitner was very clear about the inflation concern last year. He says “Geitner thought the Fed didn’t need to be raising rates, but instead needed to be focused on the troubles in the financial markets.” Liesman said Geitner has been involved in other government bailouts like the Long Term Capital Management crisis. “He knows how to go in, do the job and get out,” he explained.
Cheap Values
The crew talked about whether some blue chip stocks under $10 per share are value trades or traps. Karabell said Nvidia (NVDA), Corning (GLW) and Broadcom (BRCM) are all value trades. Adami told viewers that Broadcom is a “raging buy” here off Obama’s plans for internet infrastructure spending. Finerman said Nvidia seems remarkably cheap. She says “I do own some Cisco Systems (CSCO) and Microsoft (MSFT), which also have large cash positions.” Adami said Intel (INTC) is another company with a great balance sheet and large cash position. Finerman pointed out that Dell is trading below $9 per share and has $2 to $3 of cash per share. Karabell said an energy value name is Weatherford International.
Chart Answers
The gang talked with Greg Trocolli, director of technical research at Opalesque about the technical picture for the markets. Trocolli said if the S&P 500 can close above 770 this month then we could get some constructive price action going. He told viewers he likes Goldman Sachs Group because they are taking proactive steps to be the leader on Wall Street. Macke said Goldman could go lower and the downside risk is to zero. Karabell agreed with Trocolli’s bullish view on IBM (IBM).
POPS&DROPS
POPS- Gymboree popped 2% this week. Karabell says “go Gymboree!” Hewlett-Packard (HPQ) traded up 13% this week. Adami mentioned that HPQ is still cheap at current levels.
Drops- JPMorgan Chase (JPM) plunged 34% this week. Adami said it wasn’t a good week to be a bank. Macy’s (M) fell 23% this week. Macke said not much can save Macy’s here. USG dropped 23% this week. New York Times (NYT) lost 27% this week after they cut their dividend by 74%. Macke told viewers they have a ton of debt and are run by a crazy family.
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