'Fast Money' Recap: Natural Gas Shows Its Power
As crude oil hit a record high Wednesday, the U.S. market slipped to the downside on signals of recession. The Dow lost 0.4%, the S&P 500 gave up 0.8%, and the Nasdaq tumbled 1.1%.
On
CNBC's
"Fast Money" TV show, Pete Najarian said natural gas was rising. He urged viewers to take a look at
EOG Resources
(EOG) - Get Report
,
Chesapeake Energy
(CHK) - Get Report
,
Apache
(APA) - Get Report
and the
Oil Services HOLDRS
(OIH) - Get Report
. He said the OIH has broken resistance to the upside.
Jeff Macke recommended that viewers take half of their positions off the table on this rip. This is not a full-fledged breakout, he said. Over the long term, he's bullish on the oil sector, but in the short term he recommends taking profits, he said.
3 Stocks I Saw on TV |
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The traders noted that oil inventories are lower than where they would normally be at this time of year. Najarian said that oil is the currency, now that the dollar is going lower. He said sovereign wealth funds are making a great deal of their money in oil. Seymour urged investors to be careful about the demand side in oil. He noted that refining capacity is down.
Elsewhere in commodities, Guy Adami noted that
Freeport-McMoRan
(FCX) - Get Report
hit $109 today. Buy the stock, he said. Seymour said he loves the coppers, thanks to a supply shortage in the mines.
Citigroup
(C) - Get Report
is removing $12 billion in leveraged loans from its books on a purchase by private-equity firms. Macke said that it's encouraging to see smart buyers meeting desperate buyers.
The move is bullish for financials, Macke said.
Najarian said he's holding on to his puts on the financials. He said the news is good for the sector, but it's just the beginning. He noted that
Merrill Lynch
( MER) has been talking about recession, and the
Financial Select Sector SPDR
(XLF) - Get Report
is down as well. He also noted that
Fannie Mae
( FNM) and
Freddie Mac
( FRE) are struggling.
Adami said that Citigroup has been performing well lately, and he says the stock is setting up for a short trade down to $21.50 or $22.00. Get short Citi, he said. Macke said that over the short term he would short the financials, but for an investment he would buy the dips.
Najarian mentioned
Capital One
(COF) - Get Report
as another company that will continue to suffer. People are having trouble with their car payments in addition to their mortgages, he said.
Staving Off Mister Softee
Yahoo!
(YHOO)
made another move to stave off an unsolicited bid from
Microsoft
(MSFT) - Get Report
today. Yahoo! announced that it may work out a deal with
(GOOG) - Get Report
for Google to sell ads on the Yahoo! platform. Microsoft responded by raising antitrust concerns about the Google-Yahoo! deal.
Macke said that Yahoo! is trying to do an impression of a company that's conducting business as usual. Because the government recently let Google merge with DoubleClick, it's unlikely that this deal will fail to go through, he said. Nonetheless, Microsoft will feel better if it could just secure Yahoo!, he said.
Adami said the only trade on this news is to get long Microsoft. He believes the company is undervalued, he said.
Airline stocks got slammed today as American Airlines operator
AMR
(AMR)
grounded one-third of its fleet and oil prices continued to rise.
Adami called the airlines a horrible industry. He said he believes that AMR is nonetheless setting up for a trade to the upside. Najarian said he's stuck with AMR but is holding on. The airlines will survive today's maintenance and oil "double whammy," he said.
Macke pointed out a recent customer satisfaction survey that indicated people hate the airlines. He said that the airlines are the worst industry. Najarian agreed that the sector is feeble but predicted that consolidation will leave bullish prospects for the survivors.
Boeing
(BA) - Get Report
rallied today after announcing that the delay in its Dreamliner would be more brief than had been anticipated. Adami said that
Rockwell Collins
(COL)
,
Precision Castparts
(PCP)
and
Kaiser Aluminum
(KALU) - Get Report
are ways to trade this news. He said that the airlines are going through an upgrade cycle, because "these planes are older than me."
Seymour recommended
Titanium Metals
(TIE)
, noting that the Dreamliner is popular because it's light, and titanium is the reason the plane is light.
Adami also recommended
Honeywell
(HON) - Get Report
and
Embraer
(ERJ) - Get Report
.
The transportation sector, represented by the
iShares Dow Jones Transportation
(IYT) - Get Report
ETF, is rolling over.
Adami said that there will be a continued pullback in the space, because the rails have gotten ahead of themselves. He predicted more downside for
UPS
(UPS) - Get Report
but also said that earnings for the second half of the year would be better. He said he would buy on a dip but can't quantify the extent of this pullback.
Najarian said that demand for the rails has been incredible.
Short Circuit
Circuit City
(CC) - Get Report
saw agitation from the activist investors as the retailer continues to see shares fall.
Macke said that the company is a "ridiculously slow-motion train wreck." He also said that
Bed Bath & Beyond
(BBBY) - Get Report
, which he said is a "towel store," is broken.
Najarian pointed out that
Williams-Sonoma
(WSM) - Get Report
has been faring poorly as well.
Protestors rallied against China in San Francisco as the Olympic torch traveled through the city. Tim Seymour said that now may be the time to sell Chinese stocks. The market trades at 15 times earnings, he said. Most of recent profits have been from equity investments in Chinese stocks, creating a virtuous cycle for the group. He said that that move is likely over now, and the Shanghai market is not cheap even down 35%. The Olympic trade is over, he said, but he still likes
Baidu
(BIDU) - Get Report
,
China Mobile
(CHL) - Get Report
and
PetroChina
(PTR) - Get Report
. Adami agreed with Seymour about China Mobile.
Najarian said he won't play China because he prefers to play infrastructure using U.S. stocks such as
Fluor
(FLR) - Get Report
,
Foster Wheeler
(FWLT)
and
Chicago Bridge & Iron
(CBI)
.
The traders welcomed
CNBC
contributor Dennis Gartman to the program to discuss commodities. Gartman said the rise in oil prices is due largely to a collapse in inventory levels. The whole world expected inventories to rise, he said, and when they came in lower, people were caught off guard, he said. He recommended buying oil on breakouts. He said that over the long term the commodity will continue to rise.
Gartman said that gold's rise is related to the dollar. He said that as the dollar weakens, gold will continue to rise. He said that the
streetTracks Gold
(GLD) - Get Report
ETF will go higher, and he's more comfortable being long gold than crude at these levels.
Gartman concluded by saying that corn and beans will continue to rise in price, but that wheat will not.
Andrew Burkly, an analyst at Brown Brothers Harriman, said that the S&P may be poised for a breakout here. He said that if volatility breaks to the downside, the market may reach a bottom. He recommended oil- and gas-drilling stocks as a way to play the breakout.
Seymour said that he's skeptical of Burkly's theory, saying that volatility is actually pushing through its 200-day moving average to the upside. He said the VIX volatility index leads the S&P, and he believes the market will go further down.
Macke said that the
U.S. Oil Fund
(USO) - Get Report
is showing a much better technical breakout here. He said the stock market is not breaking out.
Adami said he liked the prospects for oil drillers and recommended
Halliburton
(HAL) - Get Report
and
Schlumberger
(SLB) - Get Report
.
AMR announced during the show that it should have service back to normal by next week. Najarian said that he believes the dip in the stock is temporary and that AMR will rally from here.
Fixing Pfizer
As part of a series of segments on ailing companies, Guy Adami offered his recommendations for getting
Pfizer
(PFE) - Get Report
back on track. The drug company is suffering from a stagnant pipeline.
Adami said Pfizer should start playing offense and offer Wall Street a sense of the company's direction. He also said that the company should put its excellent balance sheet to great use by buying another company such as
Cephalon
( CEPH). Najarian said that a host of companies, including
Myriad Genetics
(MYGN) - Get Report
,
Biogen Idec
(BIIB) - Get Report
or
Bristol-Myers Squibb
(BMY) - Get Report
would work. Finally, Adami said, the "Viva Viagra" ad campaign is simply horrible.
Pete Najarian moved on to discuss a trade in coal. China will soon become a net importer of the commodity, adding to demand. Najarian said that the U.S. relies on coal for 50% of electricity generation and it is also important for steel production. He said the
Market Vectors Coal
(KOL) - Get Report
ETF is the best way viewers can play coal.
Adami recommended railroads on the back of the coal market, because they transport the stuff. He said
Burlington Northern Santa Fe
( BNI),
Union Pacific
(UNP) - Get Report
and
CSX
(CSX) - Get Report
are all good to own.
Najarian also recommended
Patriot Coal
( PCX) and
Alpha Natural Resources
(ANR)
.
Final Trade
Jeff Macke selected Boeing. Adami recommended AMR. Najarian chose puts on
Pilgrim's Pride
(PPC) - Get Report
.