'Fast Money' Recap: Financial Follies

Stockpickr Staff

Stocks in New York ended a mixed day on the downside, as enthusiasm for the Fed's efforts to stem the liquidity crisis waned, and oil prices hit record highs. The Dow lost 0.4%, the S&P 500 fell 0.9% and the Nasdaq ticked down 0.5%.

On CNBC's "Fast Money" TV show, Karen Finerman said the day started out nice overseas in Australia and Europe, but everything started rolling over. She pointed out concerns about liquidity troubles in Bear Stearns (BSC Quote - Cramer on BSC - Stock Picks) and other financials.

Pete Najarian said that the Fed's action yesterday was different from rate cuts because it did supply liquidity to the market, which freed people to trade. However, he said that trading doesn't mean economic troubles are over. He reminded viewers of a Deutsche Bank analyst's statement today that if the credit crisis were a baseball game, it'd be in the seventh inning.

Tim Seymour argued that credit risk has not been priced into the market, and that there hasn't been a high-volume capitulation.

Adami said the true test of the market will come tomorrow. He predicted either a collapse in stocks or a rally. He said that sectors that have been working continue to produce, and pointed to Burlington Northern Santa Fe (BNI Quote - Cramer on BNI - Stock Picks) and DuPont (DD Quote - Cramer on DD - Stock Picks) as stocks to look at.

The traders took a look at oil's record rise, and charted it against the euro's rise. Tim Seymour said that an oil trade is a currency trade right now.

Najarian said that other commodities, such as grains, are also hitting record levels. He suggested taking profits in Burlington Northern and wait for a pullback. He noted that the Financial Select SPDR(XLF Quote - Cramer on XLF - Stock Picks) is up 10% in two days, and urged viewers to take profits.

Finerman said things are looking ugly in the banks. She argued that risk has been repriced and said the major issues in the banks were the size and duration of the writedowns. She said it would be hard to go short the financials in front of a likely Fed rate cut.

Seymour disagreed, saying that he didn't see markdowns in triple-A rated paper and that there was a significant amount of delinquent subprime mortgages behind it.

Adami cautioned viewers not to short the financials or they will get run over. He suggested buying US Bancorp (USB Quote - Cramer on USB - Stock Picks). Bear Stearns notwithstanding, there are banks that are attractive here, he said.

Finerman said Bear's price action has been horrific and she wouldn't be long the company. Seymour said that he believed the rally in financials was only short-covering.

Najarian pointed out that Bear CEO Alan Schwartz was comfortable with the company's forecast earnings range. He said to watch as Bear, Lehman Brothers (LEH Quote - Cramer on LEH - Stock Picks) and Goldman Sachs (GS Quote - Cramer on GS - Stock Picks) report earnings. He said he was inspired by Schwartz's words but sensed nervousness in the stock.

On news that Target (TGT Quote - Cramer on TGT - Stock Picks) had sold half of its credit card receivables, Finerman said it would be nice to know if the company sold the good half or the bad half. A rally in specialized retail indicates that the consumer is injured but not dead.

Adami said that MasterCard (MA Quote - Cramer on MA - Stock Picks), which he called a huge international growth story, is the way to play specialty retail. Najarian said he would buy Visa on its upcoming IPO.

Southwest Airlines (LUV Quote - Cramer on LUV - Stock Picks), which does not have a history of mechanical issues, had to ground a number of its planes today. Seymour said that this news was a Boeing (BA Quote - Cramer on BA - Stock Picks) and Airbus trade.

Adami pointed out that this was an indication of an upcoming upgrade cycle in the airlines. He suggested Rockwell Collins (COL Quote - Cramer on COL - Stock Picks) as a play on the trend. He said it was cheap at 12.5 times forward earnings.

On insider buying in Crocs (CROX Quote - Cramer on CROX - Stock Picks), Finerman said that the board bought 250,000 shares for $5 million. She said other insiders are restricted from buying because they sold, but their wait time is almost over. She pointed out that CEO Ron Snyder is free to buy Crocs stock again on April 1. Adami said that valuations are fair in Crocs.

Najarian pointed out that Chesapeake Energy (CHK Quote - Cramer on CHK - Stock Picks) was another stock to see insider buying lately.

Gibson Guitars announced it is suing Activision (ATVI Quote - Cramer on ATVI - Stock Picks) for patent violation. The traders agreed that the suit would likely not have a major impact on the company.

Moody's cut its rating on bond insurer Ambac (ABK Quote - Cramer on ABK - Stock Picks). The traders once again didn't have much to say about the news.

To talk about several technical indicators of a potential rally, the crew welcomed Jeff Degraff, chief technical strategist at ISI Group. He pointed to a peak in the put-call ratio as a bullish sign and pointed to big breadth.

He said yesterday's rally was the first real response to Fed action since the decline started. Adami said that people began stepping off the sidelines and putting money to work yesterday, which he saw as very constructive.

Seymour disagreed, saying he didn't think it was long-only money that went into the market after the Fed's action.

Degraff then pointed out that the advance-decline ratio has also seen a spike, which correlates to a bull run in the market. He said that broad surges like the ones seen yesterday are hard to reverse in the near term. He predicted a run or at least a bounce in the financials.

Najarian agreed that there was likely fresh money, but he saw it as attempts to bottom pick. He predicted another downturn in the market, and said that Wachovia (WB Quote - Cramer on WB - Stock Picks) Wells Fargo (WFC Quote - Cramer on WFC - Stock Picks) and Goldman Sachs made him nervous.

Microsoft (MSFT Quote - Cramer on MSFT - Stock Picks) announced it was sticking by its Yahoo! (YHOO Quote - Cramer on YHOO - Stock Picks) bid ahead of an analyst meeting. As a Yahoo! shareholder, Finerman implored CEO Jerry Yang to negotiate with Microsoft. Najarian said Microsoft wasn't just sitting around waiting for the Yahoo! deal. He pointed out that Microsoft is going to acquire many other companies in the next five years. There's nothing but upside for Microsoft, he said.

The traders moved on to discuss whether China's new-found economic independence from the U.S., and whether growth in China would help American markets. With a strong domestic buildout and U.S. exports to China rising, there may be a shift in the way the two economies interact.

Seymour observed that consumer consumption and incomes are rising in China. He said to watch Chinese companies with China exposure such as China Life (LFC Quote - Cramer on LFC - Stock Picks) and China Mobile (CHL Quote - Cramer on CHL - Stock Picks). He said he didn't foresee pain in the U.S. off a China slowdown.

Trader Radar

Boston Beer (SAM Quote - Cramer on SAM - Stock Picks) traded at seven times its average daily volume today.

In heath care, Adami wanted to know how Humana (HUM Quote - Cramer on HUM - Stock Picks) could offer great guidance and then a month later slash its forecasts.

To help answer that question, the crew spoke with Kris Jenner, managing director of the Health Sciences Fund at T. Rowe Price. He said that health companies base their prices on expectations. The revisions came when WellPoint (WPT Quote - Cramer on WPT - Stock Picks) realized its medical costs were higher than when they priced their insurance, and Humana had mispriced a pharmacy benefit for seniors. Because the companies have such thin margins, a slight miscalculation can lead to drastic earnings revisions, he said.

He was bullish on the sector, however. He said that if this problem of pricing is not an industry-specific issue but rather a series of isolated situations, there's opportunity in stocks such as Cigna (CI Quote - Cramer on CI - Stock Picks), Humana and Coventry (CVH Quote - Cramer on CVH - Stock Picks). He said they have a chance to be up at least 25% in the next 12 months.

Seymour introduced a new segment on the show, the Emerging Money Top 20, a group of highly influential emerging-market companies. He named Taiwan Semiconductor (TSM Quote - Cramer on TSM - Stock Picks) and Embraer (ERJ Quote - Cramer on ERJ - Stock Picks). He called Taiwan Semiconductor a bellwether for Taiwan and predicted that Embraer would begin to take market share from other companies in commercial and defense aircraft.

Final Trade

Seymour picked Chungwa Telecom (CHT Quote - Cramer on CHT - Stock Picks). Adami selected Crocs (CROX Quote - Cramer on CROX - Stock Picks). Finerman chose Microsoft (MSFT Quote - Cramer on MSFT - Stock Picks). Najarian plugged DuPont.

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