'Fast Money' Recap: Goldman Fallout
NEW YORK (
) -- The markets were mixed Monday as investors sorted out the fallout of Goldman Sachs' civil fraud charges.
The
Dow Jones Industrial Average
jumped 73.39, or 0.67%, to 11,092.05, while the
S&P 500
gained 5.39, or 0.45%, to 1,197.52. The
Nasdaq
fell 1.15, or 0.05%, to 2,480.11.
Pete Najarian said on
CNBC
's "Fast Money" TV show, that the numbers on
IBM's
(IBM) - Get International Business Machines Corporation Report
earnings were good across the board, although there was some concern about its gross margins, which fell below Street expectations.
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Guy Adami said he expects the stock, which pulled back in the previous quarter on a good earnings report, to drop, giving investors a chance to buy Big Blue on a pullback.
said the stock's valuation looks fair, while Tim Seymour said IBM's story continues to "get better" as evident in its growth in global services and free cash flow.
Jim Goldman, a
CNBC
reporter who was listening in on the conference call, wondered whether IBM's gross margin miss will continue into the second and third quarters. He said the numbers are neither too hot or cold.
For a derivative trade, Brian Kelly said he would take the uptick in consulting and software services in IBM's earnings and invest in
Rackspace
(RAX)
, which provides consulting and computing software services to small and medium sized companies.
Melissa Lee, the moderator of the show, shifted to another big story for the day, the midday turnaround in Goldman Sachs, after
Bloomberg
reported that SEC vote to sue Goldman was 3-to-2 along party lines.
Finerman said she didn't think the narrow vote will lessen the public outcry and momentum to get something done in financial reform. She also said she didn't know what the fallout will be from Goldman's securities fraud case.
Dennis Gartman said he expects Goldman to report good earnings Tuesday. However, he said Goldman will be damaged for a long time to come from this episode. "The public wants to see this happen," he said. "The implications for the financial instruments arena are material and will last for awhile.
He advised Goldman's CEO to be straightforward, but Lee said it doesn't look like he will appear. Rather Lee said the company indicated in a release that the CFO and general counsel will be taking questions.
Lee noted a breaking news story regarding another volcanic eruption and possibly more volcanic ash coming to Europe. Kelly said his derivative plays off the air traffic snafu is British discount airliner Ryan air and British Airways. Adami said the breakdown in air travel has led to a glut in jet fuel, which "is very expensive to store."
Lee brought in Lawrence McDonald, managing director at Pangea Capital Management, who expects the SEC will call in Lehman Bros executives and question them about mortgage-back securities and hidden assets. He said credit default protection for Goldman has doubled and is now higher than that of
Citigroup
(C) - Get Citigroup Inc. Report
.
McDonald said
Deutsche Bank
(DB) - Get Deutsche Bank AG Report
and
UBS
(UBS) - Get UBS Group AG Report
may be next because they were leaders in the CDO space.
All signs were bullish in the quick "360 review" of
Apple
(AAPL) - Get Apple Inc. Report
, which reports its earnings this week. Najarian said he'll be watching for the sales of Macs, which he insists are the key driver of the company.
Najarian noted that there was heavy option activity in Citigroup as it approaches $5. Seymour said that although Citigroup turned in a good earnings report, it's not making money from trading.
Lee brought in
Hasbro
(HAS) - Get Hasbro, Inc. Report
CEO Brian Goldner, whose company turned in a solid earnings report.
Goldner told the panel that the company's brands are seeing the benefit of consumer trends. He said the company's top eight brands account for 50% of its business and do not rely on movie tie-ins for success.
Adami said Hasbro has become a global company and its valuation is fair. Seymour said the company's margins may come under pressure.
Returning to Goldman saga, Lee brought in Stephen Gandel, a writer for
Time magazine
. He said expects more lawsuits and regulation and believes hedge funds will be the next in line to come under the scrutiny of SEC.
He said there needs to be more regular reporting of trades by hedge funds so that the SEC can be warned ahead of time of a bubble. Both Seymour and Finerman doubted whether hedge funds contributed to the problems that Goldman now face.
In the spirit of Earth Day, Adami came away from riding electronic cars convinced of its future. His trade:
Ford
(F) - Get Ford Motor Company Report
for its new line of smart cars and
BorgWarner
(BWA) - Get BorgWarner Inc. Report
.
In the final trades, Seymour said he liked
Potash
(POT)
. Adami was long
Eastman Chemical
(EMN) - Get Eastman Chemical Company Report
. Finerman liked
Corning
(GLW) - Get Corning Inc Report
. Najarian liked
Dupont
(DD) - Get DuPont de Nemours, Inc. Report
.
-- Written by David Tong in San Francisco
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.
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