'Fast Money' Recap: Dell Rings the Bell
The U.S. stock market put on a happy face after recovering from an uncertain open on Thursday. The Dow was up 0.4%, the S&P 500 gained 0.5%, and the Nasdaq jumped 0.9%.
On
CNBC's
"Fast Money" TV show, Jeff Macke said that oil didn't necessarily break down today, but it may have put in a near-term top. He observed that the commodity sold off today on what should have been bullish news. He said that overall, the market was very difficult today.
Pete Najarian agreed that oil didn't necessarily break down. He said crude needs to get below $120 a barrel before the stock market can meaningfully recover.
Adami also pointed out that bullish action on Thursday and Friday of last week in the
UltraShort Oil & Gas ProShares
(DUG) - Get Report
may have indicated that there would be a top this week.
Macke said that a lot of bearish news for crude had been swallowed by the market earlier during the bull run. He said that demand for gasoline is weakening as prices go up.
We Get a Dell
Dell
(DELL) - Get Report
delivered an earnings beat today. Adami said that gross margins were a little thin. He said that management is nonetheless running the business better than before. Investors should take profits, he said.
Najarian pointed out that 60% of Dell's revenue came from the U.S. He said that the earnings beat was impressive considering the slowdown in the U.S. market. By contrast,
Hewlett-Packard
(HPQ) - Get Report
draws 60% of its revenue from overseas. He agreed with Adami that investors should sell here.
Macke said that PC sales continue to be stronger than what was expected. He pointed out that Dell beat on both the top and the bottom lines. He said that despite talk of a U.S. slowdown, chips and computers are still in demand.
The Great Google
Najarian observed data from comScore indicating that
Google's
(GOOG) - Get Report
Internet presence is up 20% year over year. He said that
Microsoft
(MSFT) - Get Report
and
Yahoo!
(YHOO)
have lost where Google has gained, and that's why there is still talk of the two doing a merger.
Adami said investors should be wary of
Intel
(INTC) - Get Report
which was down 1.4% today on a decent tape. He said he believes there's further downside for the stock, but he likes it for the long term.
MasterCard Maxed Out?
Of
MasterCard
(MA) - Get Report
, Adami pointed out that the stock is not a U.S. story. He said weakening charges in the U.S. are compensated by rising revenues elsewhere. He cautioned viewers against buying MasterCard tomorrow. The easy money is over in the stock, he said.
Najarian said that the bull thesis is intact for MasterCard as well as
Visa
(V) - Get Report
. He said transaction fees are going up globally.
Finerman said of the financials that there has been a lot of talk in the past couple days that the credit crisis isn't over. She pointed to recent concern over
Lehman Brothers
(LEH)
as an example. She said at some point the stocks bottom out and she says that over time she will make money by buying the financials at these levels.
Ode to Joy
Of
Joy Global
(JOYG)
Adami said that is a great story and along with
Bucyrus
(BUCY)
, it constitutes the largest oligopoly in the world. He said he wouldn't jump into Joy Global here, but either one is a buy on a pullback.
Najarian said the coal sector and the railroads continue to chug along. He said
Norfolk Southern
(NSC) - Get Report
continues to lag its sector and remains cheap compared with
Burlington Northern Santa Fe
(BNI)
and
Union Pacific
(UNP) - Get Report
. He said there's still a lot of upside in coal names as well.
Merck
(MRK) - Get Report
offered favorable news today on its drug Vioxx. Adami said that Merck is setting up for an easy trade on the long side with a stop out below $36.50.
Diesel Power
The gang then welcomed Bruce Smith, head of
Tesoro
(TSO)
, to the show. Smith said that crude is an input but his company shouldn't care at what level oil is trading. He said that margins have improved in the past few months. He said the company is producing as much diesel fuel as possible because margins are better in that business.
Smith also said Tesoro has some excess inventory, but he won't say exactly where and when the company will liquidate some of that excess.
The traders spoke with independent oil trader Joe Terranova about energy. He said that longer-term oil futures contracts have fallen recently. He said there's a lot of technical structure for crude prices at $120 a barrel. He said that if the commodity breaks below $120, there will be a lot of selling pressure. He's playing the short side of oil by way of
Hess
(HES) - Get Report
and taking a long position in
Southwest Airlines
(SWA)
. He said he is also getting long the Canadian dollar.
Food Stuff
Jon Najarian joined the program to talk about restaurants that are effectively hedging against rising food costs. He said
Darden Restaurants
(DRI) - Get Report
is doing very well hedging soy, grains and corn. He said the hedging is responsible for the stock's move from $20 to $36.
Najarian said he also likes
Kellogg
(K) - Get Report
because it hedges 70% of its grain exposure. He said
Starbucks
(SBUX) - Get Report
is also effectively hedging its coffee exposure. He said
Bob Evans
(BOBE)
and
Buffalo Wild Wings
(BWLD)
are not hedging as effectively. Shorting those last two is a better trade than getting long effective hedgers, he said.
The Urge to Merge
The traders then discussed some gigantic mergers, noting that there is high risk in the deals but sometimes great reward. Macke said that Microsoft shareholders carry the biggest risk on the pending merger with Yahoo!.
Finerman said that
Boston Scientific
(BSX) - Get Report
, another major acquirer, had been down a great deal since but is now making a recover. She said it may be time to get long Boston Scientific. Najarian agreed.
Trader Radar
Men's Wearhouse
(MW)
shares went down on very high volume.
The traders then discussed the role of speculators in the continued rise of oil prices. Finerman said she hesitates to blame speculators. She said eventually any speculators would have to bring supply back to market to realize their gains.
Najarian said there is some degree of speculation but he says it's exaggerated.
Adami said he believes passive index funds are driving the price up but are not taking supply off the market.
Bob Hirsch, senior energy advisor at Management Information Services, joined the show to talk about the speculator phenomenon. He said he doesn't think speculators are playing a major role in crude. Instead, he cited a plateau in worldwide production. He said that he's not sure Brazil and Iraq are going to change the fundamentals of the situation in the short term.
Fast Messages
A viewer asked whether good earnings from Dell would mean good news when Microsoft reports earnings. No, Macke said, Dell's beat was specific to Dell.
Another viewer asked about a sell point for
Amylin
(AMLN)
. Najarian recommended selling some July calls instead of picking a sell point.
A third viewer asked about insider buying at
Chesapeake Energy
(CHK) - Get Report
. Najarian said that the insider buying sets the price, and he's bullish on the company.
Final Trade
Macke picked
J. Crew
(JCG)
. Adami chose Tesoro. Finerman selected Citigroup. Najarian chose Chesapeake Energy.