'Fast Money' Recap: Consumer Confidence: Market Catalyst?

The trading panel doubted whether a rise in consumer confidence had anything to do with today's rally.
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The markets rallied Tuesday, but the trading panel for

CNBC

's "Fast Money" TV show doubted whether the rise in the consumer confidence index in May had anything to do with it.

The

Dow Jones Industrial Average

bolted up 196.17, or 2.37%, to 8,347.49, while the

S&P 500

surged 23.33, or 2.63%, to 910.33. The

Nasdaq

jumped 58.42, or 3.45%, to 1,950.43.

Melissa Lee, the moderator of the show, said today's rally helped the S&P snap a four-day losing streak and put it in positive territory for the year.

Karen Finerman was troubled with the notion of consumer confidence as a market catalyst because it merely represents a feeling of respondents about the economy as opposed to hard fast measures like inventory, growth and orders.

Similarly, Tim Seymour said it was difficult for him to buy into the consumer confidence thesis in light of the gloomy turn of events in North Korea and today's disappointing housing price report.

From a technical view of the broader market, Guy Adami said the market is exactly where he thinks it should be, between 875 and 920. He said the rally, though impressive, was on extraordinary light volume.

Joe Terranova said today's trading session reflected once again a market that is consolidating its gains from the past six to eight weeks.

Lee then moved to some of the sectors that lifted today's market. First up, retail stocks. Adami said some of these retail companies like

Gap

(GPS) - Get Report

are doing well not because of a jump in consumer confidence but because they are being run better on leaner inventories.

Finerman said the valuation of some of the specialty retailers are being stretched because their bars are getting set higher. That's why she said she's long on

Wal-Mart

(WMT) - Get Report

but short the

SPDR S&P Retail

(XRT) - Get Report

.

Terranova said the tech stocks set the table for the market after

Apple

(AAPL) - Get Report

got an overweight from Morgan Stanley. Finerman said the rally was led not by consumer names but by financial stocks, including

JPMorgan Chase

(JPM) - Get Report

, which came on strong, along with biotech and health care names.

The panel sounded a word of caution on the disappointing housing news that saw the S&P/Case-Shiller U.S. National Home Price Index report a 9% drop in the first quarter, the worst decline in 21 years.

Adami said the discouraging report underscores the point that a lot of inventory still has to be burned off before the housing sector stabilizes. He said investors should tread carefully among the homebuilder stocks which he likened to buying lottery tickets.

Technology stocks played a big role in today's trading session. Terranova said Apple surged because the Morgan Stanley report noted that demand for the iPhone will be stronger than expected. He said he was also impressed with the other tech leaders, including

Research In Motion

(RIMM)

,

Google

(GOOG) - Get Report

and

IBM

(IBM) - Get Report

.

Lee shifted the topic to oil which climbed to $62 a barrel. Terranova said the rise defied logic because there's no reason for oil to be at this level with demand at low levels. Finerman agreed, saying it doesn't make sense for consumer confidence to up along with oil and natural gas. "That's kind of circuitous logic," she said.

Seymour said that same head-scratching logic could also be applied to the steel stocks, which were up despite weak fundamentals.

Lee brought in Dennis Gartman for his assessment of the market. He said he's been looking at the Dow in the range of 8,475 to 8,525, adding the market would look mighty impressive if it went above 8,500.

Lee shifted the discussion to the Treasury auctions and the difficulty the government is getting itself into on the long-yield side. Finerman said she believes it's going to get increasingly difficult to get these bigger auctions done without setting interest rates higher. She said that would create a touchy situation for

Fed

Chairman Ben Bernanke and his efforts to keep a nascent economic recovery going.

Michael Pond, capital director for Barclay's, said rates will continue to head higher because of supply pressures, with $120 billion worth of bond issuances this year compared to $20 billion for last year.

Barry Ritholtz, CEO of Fusion IQ, came on the show to talking about the housing markets. He said home prices are back to where they were in 2002. He said prices are in the seventh inning with about 5% more downside to go. He warned there will be no quick snap-back once the bottom is reached.

In the final trades, Seymour was for

Caterpillar

(CAT) - Get Report

. Adami was long

Schlumberger

(SLB) - Get Report

to $57, and Terranova was long

Amgen

(AMGN) - Get Report

.

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"'Fast Money'Portfolios of the Week" on Stockpickr every Thursday.