'Fast Money' Recap: Hunting for Bear

Stockpickr Staff

A 45-minute rally on benign inflation data at the beginning of Friday's session was quickly reversed on news of a Federal Reserve bailout for Bear Stearns (BSC Quote - Cramer on BSC - Stock Picks). The Dow was down 1.6%, the S&P 500 lost 2.1%, and the Nasdaq was off 2.3%.

On CNBC's "Fast Money" TV show, Pete Najarian called Bear's falling price action on the day "unbelievable." He noted that the week had been packed with news, from the Eliot Spitzer scandal to fairly tame inflation data to the Bear Stearns catastrophe. He said the Bear news was at first met calmly, but as volatility reached 700%, the selling reached high levels. Trades in put options on Bear were highly profitable today, he said.

Lehman Brothers (LEH Quote - Cramer on LEH - Stock Picks) is experiencing the same kind of put-buying the market saw on Tuesday for Bear. A lot of people are concerned, he said.

Karen Finerman said that it was hard to disconnect a visceral reaction from rationality in this week's market. When things are down in integers, you got to buy, she said. Although her hedge fund is nearly perfectly hedged, she called the environment "scary."

Guy Adami said today's market washed a lot of people out. He said earnings statements from the brokers would be the story of the upcoming week.

CNBC on-air editor Charlie Gasparino joined the show to discuss more news from the banks. He said that UBS had been actively shopping Pain Weber, its brokerage firm, to Barclays and Wells Fargo (WFC Quote - Cramer on WFC - Stock Picks), among other banks. Things are getting pretty bad when you're selling major assets like this, he said.

Najarian said the news was not a shock. Adami noted that prime brokerage was a big part of Bear Stearns' business. He noted that that space was a zero-sum game, so someone will have to emerge a winner.

In commodities, gold reached $1,000. Joe Terranova said that it was too late for investors to get into gold. He recommended looking at the CurrencyShares Yen Trust (FXY Quote - Cramer on FXY - Stock Picks) ETF as a play on a weak dollar. Adami recommended Nucor (NUE Quote - Cramer on NUE - Stock Picks) and U.S. Steel (X Quote - Cramer on X - Stock Picks) as plays that were proximate to the commodity space.

Shares of Yahoo! (YHOO Quote - Cramer on YHOO - Stock Picks) lost 8% this week. Finerman said that the Wall Street Journal reported that the company had met with Microsoft (MSFT Quote - Cramer on MSFT - Stock Picks) on Monday. As a shareholder, she expressed hope that they get a deal together. Adami said investors might want to get long Yahoo! The downside is limited, he said.

Najarian called Yahoo!'s share price a sliding scale levered to Microsoft. If Microsoft shares go down, so do Yahoo!'s, he said.

Health insurers Humana (HUM Quote - Cramer on HUM - Stock Picks) and WellPoint (WPT Quote - Cramer on WPT - Stock Picks) couldn't catch a break this week, Najarian said. Humana cut 2008 earnings forecasts in half. He said the bottom is probably set in those names. Aetna (AET Quote - Cramer on AET - Stock Picks) reiterated earnings, so that stock should be interesting going forward, he said.

Adami observed that Pfizer (PFE Quote - Cramer on PFE - Stock Picks) hit a 52-week low today. He called the CFO's comments about a "seller's market" for potential acquisitions "disheartening."

Terranova said Genentech (DNA Quote - Cramer on DNA - Stock Picks) is best in breed, and he recommended buying it if it goes lower.

Finerman said Bain Capital and Thomas Lee's move to acquire Clear Channel (CCU Quote - Cramer on CCU - Stock Picks) is scheduled to close. As shares started to trade down, she bought March options with a nice risk-reward ratio and made a lot of money.

In industrial names, Adami noted that Caterpillar (CAT Quote - Cramer on CAT - Stock Picks) is an interesting play, understanding that the tape is miserable. Goldman Sachs likes Deere (DE Quote - Cramer on DE - Stock Picks) better, he said.

Quicker Than the Ticker

Nucor is up 16% since Adami recommended it. Applied Materials (AMAT Quote - Cramer on AMAT - Stock Picks) jumped 7% after Najarian said to buy it. Finerman said to get short Solar Fun (SOLF Quote - Cramer on SOLF - Stock Picks), and since then the stock is down 68%. Terranova called a bull run in natural gas, and the commodity has risen 35% since.

Next week, Bear Stearns and Goldman Sachs are issuing earnings. Options trader John Najarian joined the crew to discuss what this means for investors. He said that Bear shares have been beaten as much as he's ever seen. This decline was telegraphed throughout the week with bankruptcy bets, he said. He thought a takeunder was possible and that the company's earnings wouldn't be that important to the stock.

Pete Najarian predicted that Goldman would benefit from the Bear debacle. If the company has been trading off its own analysts, it's had a phenomenal quarter, he said. He recommended Goldman whenever it's under $160.

Finerman said she doesn't think earnings matter that much this quarter. Adami said Lehman Brothers' (LEH Quote - Cramer on LEH - Stock Picks) earnings promise to be fascinating. They could be the next bank to take a tumble, he said.

The traders welcomed Joe Lavorgna, chief fixed income economist for Deutsche Bank, to discuss Fed action in the upcoming week. Lavorgna said that this is all about a deleveraging of banks. The Fed will try to ease pain, he said, and a 100-basis-point cut is on the table. He predicted a tough week for the markets coming up.

The "Fast Money" team then moved on to discuss whether Visa's upcoming initial public offering will help the banks. Adami said not to buy the banks in this environment. He said the action on Visa would be very telling about market sentiment. He stressed that Visa gets money from transactions and is not involved in credit risk. The same is true of MasterCard (MA Quote - Cramer on MA - Stock Picks). He cautioned investors against rushing into Visa's IPO. Terranova agreed.

Finerman said that investors who are bearish on credit card receivables might want to short Capital One (COF Quote - Cramer on COF - Stock Picks).

Najarian said MasterCard should continue to rise. Terranova said investors may sell out of MasterCard to buy Visa on the IPO.

Trader Radar

Ann Taylor (ANN Quote - Cramer on ANN - Stock Picks) shares traded on unusual volume this week.

Fast Fire

Adami had counseled against buying Exxon Mobil (XOM Quote - Cramer on XOM - Stock Picks). It rallied 3%. He said he would still avoid Exxon, and he recommended the U.S. Oil Fund (USO Quote - Cramer on USO - Stock Picks) ETF as a play on oil.

Finerman had recommended Saks (SKS Quote - Cramer on SKS - Stock Picks). Shares fell 19%. When a stock falls that far, get out, she said.

Najarian had recommended Nokia, only to see it fall. He still thinks it has an attractive valuation and that it will rise over the long term.

Terranova had recommended Weyerhaeuser (WY Quote - Cramer on WY - Stock Picks). The stock is down 2%. He said lumber prices are under pressure and he made a mistake.

Surprise guest InterContinental Exchange (ICE Quote - Cramer on ICE - Stock Picks) CEO Jeffrey Sprecher commented on the fate of exchanges. He predicted structure and futures trading by the Fed to alleviate pain in the markets.

He said ICE has had record volume in January and February, but the stock has experienced volatility because it is in the rocky financial services space.

Final Trade

Terranova picked the CurrencyShares Japanese Yen Trust. Adami wished his son happy birthday. Finerman recommended NYSE Euronext (NYX Quote - Cramer on NYX - Stock Picks). Najarian wished Jeff Macke a happy anniversary.

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