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'Fast Money' Recap: Yahoo! Cuts Could Entice Microsoft

The crew also discusses the upcoming Fed meeting.

The stock market put in a solid day Tuesday as investors bid up stocks in hopes the Fed will cut rates tomorrow. The Dow finished up 96 points and the Nasdaq closed up 8 points.

Guy Adami explained that the bond markets are looking for a 50-basis-point rate cut. Karen Finerman says the Fed will cut 25 basis points, but that she will be paying attention to the Fed's language to see what the central bank says about growth, inflation and guidance.

Pete Najarian says that if the Fed cuts 25 points, the

Financial Select Sector SPDR

(XLF) - Get Financial Select Sector SPDR Fund Report

will sell off.

3 Stocks I Saw On TV

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Yahoo!

(YHOO)

reported a 23% drop in fourth-quarter earnings, and the CFO says the search giant plans to cut 1,000 jobs. Najarian says that could create an opportunity for

Microsoft

(MSFT) - Get Microsoft Corporation Report

to buy Yahoo!.

Adami wondered what it means for

Google

TheStreet Recommends

(GOOG) - Get Alphabet Inc. Class C Report

. Macke says it's really hard to make a bullish case for Yahoo!, and he doesn't know what to do with the stock. He disclosed he currently owns YHOO and that it eventually will bounce.

Bank stocks and broker stocks led the market higher Tuesday as traders position for another rate cut. Najarian explained that the president of

Goldman Sachs

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

sold $6 million in stock, and this could be an indication of which way the stock will go from current levels. Adami likes

U.S. Bancorp

(USB) - Get U.S. Bancorp Report

in the financial sector.

Lehman Brothers

(LEH)

raised its quarterly dividend by 13% and announced it will buy back 100 million shares. Finerman says she is short the stock, and isn't happy about the news. Najarian was impressed about the direction Lehman is going. Macke speculated that things might not be as bad as they seem at LEH.

Old Economy stocks from sectors such as chemicals, coal, fertilizer and railroads put in a strong day Tuesday. Adami say Buffett name

Burlington Northern Santa Fe

(BNI)

is a buy, as is agriculture play

DuPont

(DD) - Get DuPont de Nemours, Inc. Report

.

Najarian explained that every time BNI goes under $80, Warren Buffett buys more stock. For an agriculture play, he would look at

Dow Chemical

(DOW) - Get Dow, Inc. Report

. Adami and Najarian like coal names

Peabody

(BTU) - Get Peabody Energy Corporation Report

,

Joy Global

(JOYG)

and

Arch Coal

(ACI) - Get Albertsons Companies, Inc. Class A Report

.

Refiner Trade

The oil refining sector was a big winner on Tuesday after

Valero

(VLO) - Get Valero Energy Corporation Report

reported a 52.2% jump in revenue growth. Is it time to take profits in the sector?

Finerman disclosed that she sold 75% of her positions in the refiners over the last couple of days. Najarian believes now is the time to sell into the strength and look to buy on pullbacks. His best pick for the refiners is

Marathon

(MRO) - Get Marathon Oil Corporation Report

.

Adami says

Tesoro

(TSO)

can be bought ahead of its earnings on Feb. 1. He says TSO has room to go higher and has an attractive valuation. Macke advised investors to build positions in the refiners and don't chase them here.

Short-Squeeze Plays

The "Fast Money" crew highlighted some stocks that could be seeing an artificial bounce from a short squeeze. Finerman explained that

Ihop

(IHP)

has 33% of its float sold short, and any news could send the stock higher. Macke says it's time to get out of

Lexmark

(LXK)

because the stock went up due only to a short squeeze. He says the pop in the stock won't last long, so investors should use the mechanics of the squeeze to get out. Najarian recommends investors look at buying

Crocs

(CROX) - Get Crocs, Inc. Report

, which has 16 million of its 70 million shares outstanding short.

JetBlue CEO Interview

JetBlue

(JBLU) - Get JetBlue Airways Corporation Report

shares surged 25% after the airline reported better-than-expected revenue and its first full-year profit in three years.

JetBlue CEO David Barger joined the "Fast Money" crew to discuss his firm's prospects. According to Barger, JetBlue's success comes from the firm learning how to manage the high cost of oil. Barger explained that 35% of his company's fuel costs are hedged, and he plans to keep hedging into the future. Barger also expressed how excited he is that the Lufthansa deal has been completed. He expects to see new synergies from the deal.

Michael Steinhardt Interviewed

Former hedge fund manger Michael Steinhardt joined the "Fast Money" crew to offer his take on the markets. Steinhardt explained that the Federal Reserve has lost a lot of respect in the markets. He says the Fed is now nothing more than a pedestrian group of guys who meet and try to figure out what to do.

Steinhardt explained that there's two ways to look at the market here. Either the market is in a traditional cyclical downturn, or things could be much worse and this time it's different because of the extraordinary amount of lending around the world. He wouldn't disclose which category he believes the current market falls into.

Trader Radar

Phillips-Van Heusen

(PVH) - Get PVH Corp. Report

traded double its average daily volume Tuesday.

Pops and Drops

Pops

:

Sepracor

(SEPR)

traded up 3%. Najarian explained that SEPR bought two drugs.

Zimmer Holdings

(ZMH)

traded up 13% after the firm reported a 13% rise in profits. Najarian mentioned that Morgan Stanley put out a $86 price target on ZMH.

Cardinal Health

(CAH) - Get Cardinal Health, Inc. Report

traded up 3% even after the health care provider lowered its full-year guidance. Adami says the stock should have gone down, but if you want to be in the space, buy

McKesson

(MCK) - Get McKesson Corporation Report

.

Smurfit-Stone Container

(SSCC)

traded up 13% after the firm reported a 76% rise in profits. Finerman thinks this could be interesting for

UPS

(UPS) - Get United Parcel Service, Inc. Class B Report

and

FedEx

(FDX) - Get FedEx Corporation Report

.

Quintana Marine

(QMAR)

traded up 30%. Najarian says the entire sector is working.

Drops

:

EMC

(EMC)

fell 6%. Adami says own EMC for a trade.

Clear Channel

(CCU) - Get Cia Cervecerias Unidas SA Report

fell 7% as problems in the credit market cast doubts on a possible $20 billion private-equity buyout of the firm. Finerman says she wouldn't own CCU.

Amazon.com

(AMZN) - Get Amazon.com, Inc. Report

traded down 3% ahead of the firm's earnings. Macke thinks that eventually AMZN will be interesting.

Disney

(DIS) - Get Walt Disney Company Report

traded down 2% after Citigroup cut the stock from hold to sell. Macke didn't agree with Citigroup; he thinks DIS is a buy.

Final Trade

Macke says take gains in the Financial Select Sector SPDR ahead of the Fed meeting. Finerman favors buying TIPS (Treasury-Inflation Protected Securities). Najarian recommends

Crocs

(CROX) - Get Crocs, Inc. Report

. Adami recommended buying

Merck

(MRK) - Get Merck & Co., Inc. Report

after it reports earnings Wednesday.

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