The U.S. stock market staged a strong rally Thursday after Wednesday's rate cut from the Federal Reserve. The Dow surged 1.5%, the S&P 500 jumped 1.7% and the Nasdaq rocketed up 2.8%.
"Fast Money" TV show, the traders discussed a rotation out of commodities and into equities.
Chesapeake CEO: Stock Could Double
The traders welcomed
CEO Aubrey McClendon to the show to discuss his natural gas company, shares of which he has been aggressively buying himself.
McClendon said he believes Chesapeake trades at a discount to its actual value, and that he buys the stock whenever he can get some money together. He said the company's growth rate is very high, but the stock trades at 12 times annualized earnings. He said the stock could double.
3 Stocks I Saw on TV
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McClendon also said his company is not very dependent on commodity prices, because it hedges actively against downside risk to the price of natural gas. He said he doesn't intend to remove hedges, in part because he has such a significant stake in the company himself.
The Upside Ahead
The traders observed that over the past six months, commodities have greatly outperformed the financial and tech sectors, but in the last five days, the opposite has been true. Adami said that investors are rotating out of commodities. He said he thinks tech is undervalued.
He likes names such as
looks great here, as do the financials, he said. He also said he believes
is worth a look.
Macke agreed, and recommended buying dips in tech and financials. He cautioned viewers against chasing the stocks on rallies, but also said that people on the short side of the financial sector are wrong. Finerman said
is a proxy for the whole space. She said investors should get into the sector.
Najarian said that there's potential for financial companies to revalue their asset to the upside. He said he thinks tech has already bounced nicely, with
staging nice rallies. He said he thinks tech names are fairly valued, whereas financial names are undervalued. Finerman agreed.
Macke said that he likes
into upcoming "noise" for the stock. He said he wants the
Financial Select Sector SPDR
to drop 4%, and he'll get into it at that level.
The Jobs Effect
The traders then debated whether an upcoming jobs report could snuff out the recent rally in the stock market. They spoke with David Kelly, chief market strategist at JPMorgan Funds.
Kelly said that the economy could have lost a lot more jobs in April than investors expected. He said it's important to remember that employment is a lagging economic indicator, and recent low GDP growth likely means unemployment will rise. He said that if chain stores report rising sales and housing picks up, the market could rally even on a bad jobs number.
Kelly predicted swings in the stock market on the jobs report tomorrow. He said he thinks the economy is shifting away from the recent credit storm into an economic storm. He said the market is better equipped to deal with an economic storm because the U.S. has had more of them, whereas the credit market problems have bred a great deal of uncertainty.
Adami agreed that the job market report could be "horrible," but that it's a lagging indicator. Macke said that the market is "immunized" from a bad employment number. He said investors should count themselves lucky to get a selloff on the basis of the jobs number. Adami pointed out that economic stimulus checks could grow GDP by 3.5%.
Kelly said that the stimulus package could provide an enormous shot into the consumer sector. He predicted that most of the money will be spent, and that, combined with interest rate cuts, will energize the economy. Finerman praised Kelly's distinction between the broad economy and the credit situation.
Earnings season is nearly three-fourths complete. Adami said the lesson from this quarter is that bad earnings doesn't mean stocks can't go higher. He said that this recent earnings season has been bad, but stocks had been sold off in advance of the news, so it didn't matter. Finerman said that expectations had been very low into this earnings season.
Macke said the earnings results from the retail sector will be "horrible." He said that news will offer a buying opportunity.
In after-hours action, shares of
rolled over on an unexpected third-quarter loss.
Inside the Consumer Mind: Wedding Season
Jeff Macke offered some trades on the upcoming wedding season. He said the stigma associated with low-cost retailers has diminished, meaning more people are taking advantage of lower prices at
. He said Wal-Mart's bridal registries have gotten traction lately, which should offer an incremental uptick in the company's business.
He said to stay away from
One viewer asked if Microsoft shares are priced for an acquisition of
. Finerman said that if Microsoft doesn't get Yahoo! then Microsoft stock goes higher. Macke said shares are pricing in the idea that Microsoft chases Yahoo! higher, which he said will hurt the stock.
A second viewer asked whether the
DB Gold Double Short ETN
is a good play on a rallying dollar. Adami said that he believes there's a big wave of selling coming into gold. He cautioned that this is an aggressive play.
A third viewer asked whether the traders would still be in
. Najarian said investors should avoid the name because there isn't enough information about the company. He said that
has pulled back but he expects more room on the downside. He said the long-term bull story in Potash isn't over, though.
A fourth viewer asked if it's too late to get into
. Adami said he hasn't liked Visa, and recommended MasterCard rather than chasing Visa higher.
Macke chose the
Short Dow30 ProShares
. Adami selected
. Najarian chose