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'Fast Money' Recap: Financials Come Back Furiously

The crew surveys the playing field after the Fed's discount-rate cut.

The Fed came to the rescue of the stock market on Friday by cutting the discount rate, which sent the Dow up 230 points. Karen Finerman, on CNBC's "Fast Money" show Friday, told investors to stop fighting the Fed and cover some shorts.

Jeff Macke warned investors to stay out of short trades on the financials. Guy Adami doesn't agree with many investors who compare this market to 1987 -- valuations are not like they were then. He said this market is going higher, for another 500 points.

Pete Najarian says the bank stocks loved what Bernanke did and you saw it in the action.

The financial stocks roared back this week. with names like

Bear Stearns

(BSC)

trading up 7%. Adami would buy

Goldman Sachs

(GS) - Get Goldman Sachs Group, Inc. (GS) Report

; he believes it can hit $200 a share. He is bullish on

Bank of America

(BAC) - Get Bank of America Corp Report

and

U.S. Bancorp

(USB) - Get U.S. Bancorp Report

, which are two Warren Buffett holdings.

(

RealMoney

Take: Jim Cramer said recently, "What to buy? Exactly what everyone was shorting: the big holdings of the hedge funds that people were trying to break, including Goldman." To read more on what Cramer said,

click here.

Mark Manning said recently, "Bear Stearns has taken quite a beating lately and was due for a bounce after being quite extended below its 50-day moving average." To read more on what Manning said,

click here.

)

Commodity stocks were annihilated this week, with

Freeport-McMoRan

(FCX) - Get Freeport-McMoRan, Inc. (FCX) Report

falling 11%. Najarian says look at how the

Materials SPDR

(XLB) - Get Materials Select Sector SPDR Fund Report

hasn't recovered during the rally on Friday. He still sees market players buying puts on this index.

Energy stocks came back on Friday, erasing losses for the week. Adami says

Exxon Mobil

(XOM) - Get Exxon Mobil Corporation Report

at $80 is a value. Macke was surprised that crude oil wasn't higher.

Are technology stocks still the safe haven in this market? Najarian likes

Hewlett-Packard

(HPQ) - Get HP Inc. (HPQ) Report

,

KLA-Tencor

(KLAC) - Get KLA Corporation (KLAC) Report

,

Cisco Systems

(CSCO) - Get Cisco Systems, Inc. Report

,

Juniper Networks

(JNPR) - Get Juniper Networks, Inc. (JNPR) Report

and

EMC

(EMC)

. (

RealMoney

Take: Jim Cramer said recently, "The season is so strong for tech that you can't avoid it. Here the tell is KLA-Tencor and Cisco." To read more on what Cramer said,

click here.

)

Japan's Nikkei 225 index dropped 5.4%, its worst decline since September 2001. Finerman would dip a toe into the water and buy a little Japan. Najarian thinks now might be the time to step up and buy some Japan.

Najarian says the options activity in

Wendy's

(WEN) - Get Wendy's Company Report

is suggesting a big move is coming. Najarian says the options are suggesting to him that Nelson Peltz might buy WEN for $41.

Is now the time to buy

Daimler

(DAI)

now that the company doesn't own Chrysler? Finerman would be a buyer of Daimler here; she finds the stock interesting at these levels.

Bulls vs. Bears

The

S&P 500

lost 10% from its July highs on Thursday. Where does this market go next?

Doug Kass, a contributor to

TheStreet.com's RealMoney Silver

, playing "the bear," and Jon Najarian "the bull," joined the crew and debated which side will prevail.

Kass says the Fed's rate cut will be ineffective, and leverage is at levels never seen before. Najarian agreed with Kass on the leverage issue, but he feels the Fed did what it had to do to even the playing field.

Najarian says he was buying the market Thursday down 300 points, and his trades worked out well. Kass now feels that monetary policy is in the hands of bankers and hedge funds.

Najarian says Bernanke really knew what he was doing by cutting the rates right before the open, and he really stuck it to the shorts.

Kass says wait until the financial companies report earnings -- all the estimates on the Street are too high, and we need to see reductions. Kass says short the private mortgage issuers like

Radiant

(RADS)

and

PMI Group

(PMI)

, and he feels the stock market isn't ready for one of these firms failing, and one is going to fail.

Najarian says buy the big banks, but offered no specific names.

Face to Face

Phil in Maine asks: "With the volatility in financials, can I buy the

Financial Select Sector SPDR

(XLF) - Get Financial Select Sector SPDR Fund Report

on a dip or should I wait for more of a shakeout in the financials?"

Adami would put 15% to 20% in the financials right now and then wait a few weeks to see if it comes in some more.

Macke says if you're trying to time the trade, then buy when it feels terrible.

Finerman wouldn't jump in with both feet here.

Najarian says if you are going to buy financials, then use the XLF and don't try to pick individual stocks. (

RealMoney

Take: Steven Smith recently wrote, "In the option market, Spyder Finacial Select is among the most actively traded. Some people are still mopping up their August options, which have traded a total of 20,000 contracts, with the volume pretty evenly divided between the puts and calls. But the real notable transaction took place in the September 34 calls, which traded more than 74,000 contracts, or more than half of the strike's prior open interest." To read more on what Smith said,

click here.

)

Peter in Boston writes, "Please, for the sanity of those of us who've never experienced trading days like this, could you offer some insight as to what is causing the volatility besides the fear?"

Macke says the quantitative hedge funds were all in the same stocks, and when those funds got weak, everyone got out -- it was volatile because the trade was crowded, with traders taking opposite sides in positions.

Najarian says it's the unwinding of trades -- not fear -- that is driving this market volatility.

Rick in North Carolina writes, "Are drug stocks like

TheStreet Recommends

Johnson and Johnson

(JNJ) - Get Johnson & Johnson (JNJ) Report

a good haven for volatility?"

Adami says JNJ isn't very volatile, but he sees tremendous upside, and it is a Buffett holding.

Quicker Than the Ticker

On Aug. 14, Najarian told market players to short

E*Trade Financial

(ETFC) - Get E*TRADE Financial Corporation Report

. He said he saw massive put-buying in the name, and it turned out to be a monster winner, falling 30% two days after his call.

On Aug. 10, Macke said short

Wal-Mart

(WMT) - Get Walmart Inc. Report

. Shares of the big box retailer fell 6% after his call.

On Aug. 3, Finerman told market players to buy

Kaiser Aluminum

(KALU) - Get Kaiser Aluminum Corporation Report

. The stock spiked up 7% this week.

On July 31, Adami said the Dow Jones Industrial Average would trade down to 12,700 by Labor Day. Two weeks later, the Dow hit 12,700.

Fast Fire

Macke feels he should have sold

EMC

(EMC)

at the top when the VMware IPO came out. Macke is still holding EMC for a long-term investment.

Najarian would like a redo on buying

VMware

(VMW) - Get VMware, Inc. Class A Report

when it sold off; he believes it's a real company doing amazing things. (

RealMoney

Take: Jim Cramer said recently, "The IPO market is working -- witness VMWare." To read more on what Cramer said,

click here.

)

Adami wishes he would have listened to Kass on picking bottoms on the financials. Adami would like a redo on buying

Morgan Stanley

(MS) - Get Morgan Stanley (MS) Report

.

Finerman wishes she would have sold puts.

Pops and Drops

Pops

Dendreon

(DNDN)

traded up 17% after hours on positive results on a breast cancer drug in phase I trials. Najarian says he hopes the traders are right on this.

Bank of America rose 6% on news of Buffett taking a stake. Adami agrees with Buffett and would be a buyer.

Wells Fargo

(WFC) - Get Wells Fargo & Company Report

popped 8% and closed at an all-time high. Finerman says buy the stock.

Deere

(DE) - Get Deere & Company Report

traded up 6% on strong earnings. Najarian says global growth is real, and DE is a good play.

Research In Motion

(RIMM)

soared on Friday as investors piled into the stock before a 3-for-1 split. Najarian says that Blackberry devices are addictive, and the stock is going higher. (

RealMoney

Take: Jim Cramer recently said, "We don't focus on earnings, and then Deere just blows it out -- and voila, earnings matter!" To read more on what Cramer said,

click here.

)

Tootsie Roll

(TR) - Get Tootsie Roll Industries, Inc. Report

traded up 10%. Macke likes the stock.

Thornburg Mortgage

(TMA)

exploded up 21% on Friday as bankruptcy worries eased. Najarian likes the stock and thinks it continues higher.

Apple

(AAPL) - Get Apple Inc. (AAPL) Report

traded up 4% on Friday after a disappointing week. Macke says walk away; the stock is bad. (

RealMoney

Take: Tero Kuittinen said recently, "Their success with European and Asian consumers will determine how well Apple and Research In Motion will do in 2008 globally." To read more on what Kuittinen said,

click here.

)

Drops

Wal-Mart

(WMT) - Get Walmart Inc. Report

fell 6% after missing numbers. Macke wants CEO Lee Scott out, and says the giant retailer is in trouble until it fires him.

Home Depot

(HD) - Get Home Depot, Inc. (HD) Report

dropped 7% on soft demand forecasts.

Monsanto

(MON)

fell 8%. Adami says this stock will trade up to $100 by 2008.

Cisco Systems

(CSCO) - Get Cisco Systems, Inc. Report

dropped 4% after pulling back from a six-year high. Najarian says own Cisco.

Final Trade

Macke says buy

Whole Foods Market

(WFMI)

off the favorable court ruling involving its planned acquisition of

Wild Oats

(OATS)

.

Finerman says buy

Trinity Industries

(TRN) - Get Trinity Industries, Inc. Report

to play the railroad growth story.

Adami would buy Deere because the agriculture story is not over.

Najarian say buy

Citigroup

(C) - Get Citigroup Inc. Report

for a play on the money center banks. (

RealMoney

Take: Mark Manning recently said, "Citigroup looks like it has put in a short-term double bottom, as it made a nice reversal slightly below August lows." To read more on what Manning said,

click here.

)

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