Fast Money Recap

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'Fast Money' Recap: A Super Low Mortgage Rate

TSC Staff

Wall Street had another rocky trading session on Wednesday but finished up for the second consecutive day.

The markets waded through a mix of bad economic reports, details of the bailout plans of the Big Three automakers and more corporate downsizings.

The Dow Jones Industrial Average rose 172.60 points, or 2.1%, to 8591.68, while the S&P 50 rose 21.93, or 2.6%, to 870.74. The Nasdaq jumped 42.58, or 2.9%, to 1492.38.

Dylan Ratigan led off CNBC's "Fast Money" TV show with a breaking story on how the Treasury Department is considering a plan to halt the housing slide by lowering mortgage interest rates to 41/2%.

The trading panel's comments were mixed. Pete Najarian said the move would have a "huge" impact on homebuilding stocks. "They are recovering after being given up for dead. This is exactly what they need. It will cascade over to the financials," he said.

But Karen Finerman was "uncomfortable" about the potential move: "Every time the government comes up with a plan, there is euphoria, and then after a day or two, the market digests it, and down we go again."

Jeff Macke pooh-poohed the plan. "This is like Argentina," he said. "We change the rules every day." He said it could turn out to be "very expensive" and unproductive because "you can't force people to buy homes."

But Guy Adami said the lower interest rate could be "very meaningful" because it gets to the affordability issue and the fact there are "people on the sidelines waiting to buy homes."

Najarian said this development in the housing market ties into the commodity story and could help copper and steel companies. He noted a late rally in the steel names during the day.

Later in the show, Ratigan asked CNBC reporters Diana Olick and Steve Leisman for more information about the short Wall Street Journal story.

Olick emphasized the plans are still just in the discussion stage and directed to homebuyers. She said Treasury is trying its best to downplay the story because it has the potential "to blow up" the home mortgage market tomorrow.

Liesman agreed, saying the plan is "not ready for prime time yet." He said it could be a real problem for the mortgage markets, because it would leave homebuyers working on higher loan rates in a real quandary.

Ratigan asked the panel what they thought about buying stocks on the basis of attractive dividend yields -- a popular trend these days.

Finerman said it's much more important to consider such factors as cash flow and debt load. On that point she said she likes Philip Morris International(PM Quote) and Altria(MO Quote) for their steady cash flow and some debt. By contrast, she is down on DryShips(DRYS Quote) for its huge debt load.

Najarian was leery about getting into stocks with dividend yields in double-digits. "You should forget about it," he said. However, he liked the trading opportunities in pharmaceuticals and integrated oils, noting "they have so much cash now that they don't have to worry about cutting their dividends."

Ratigan got into a discussion with William Fleckenstein, president of Fleckenstein Capital, about his decision to get out of the business of running a short fund.

Fleckenstein said it just got to the point where it was too dangerous to be in stocks "in the face of all the liquidity facilities being trotted out by the Federal Reserve." He also noted the fiscal stimulus is coming.

He said he is doing "a lot of nothing now" except for some gold he owns.

Finerman sympathized with Fleckenstein. "I have some shorts. It can be painful on a huge up day. I do think there are some catalysts for those shorts to unravel --- debt that can't be repaid, that's a big one."

Fleckenstein said it's a trader's market right now. "I don't know if you can call it a market," he said. "Let's not try too hard until some sanity returns."

Pressed by Najarian to name some cheap stocks he would consider, Fleckenstein said there might be some trading opportunities in businesses related to the commodities such as service companies in the oil patch.

For the state of Big Pharma, Ratigan brought in Mike Huckman, CNBC reporter, for his assessment. Huckman said the stock to watch tomorrow is Merck (MRK Quote) when it gives its 2009 financial outlook. The stock, he noted, is the worst performing one in the pharma sector, down 55% for the year.

Huckman said Merck is suffering from a dearth of products in the pipeline as well as regulatory and political challenges. He said the company desparately needs a drug development in the pipeline and/or a merger or acquisition to give the stock an upside surprise.

In general, Huckman said many of the biggest names in the sector are sitting on piles of cash. Pfizer (PFE Quote), for example, is sitting on $26 billion in cash.

Najarian said Pfizer needs to replace its best-selling drug Lipitor and "snap someone up" and replenish its pipeline.