The markets ended on the upside Friday as bank stocks advanced and the rise in unemployment was less than expected.
Dow Jones Industrial Average
jumped 164.80, or 1.96%, to 8,574.65, while the
rose 21.84, or 2.41%, to 291.23, to 929.23. The
was up 22.76, or 1.33%, to 1,739.
The stress test results boosted bank stocks while the rate of increase in the jobless numbers in April was last than forecast.
Melissa Lee, the moderator of
's "Fast Money" TV show, said the S&P ended with a 6% gain for the week, with bank stocks leading the way. She asked the panel whether the rally is sustainable.
Guy Adami was encouraged by the market action today although he said it was not as good as it seemed. He said tech "completely underperformed."
Jeff Macke said the banks' secondary offerings did amazing well, especially that of
, whose stock surged during the trading session.
Joe Terranova said he saw a lot of shorts running for cover today. "Finally, we're seeing money managers understanding they have to get into this market," he said.
Karen Finerman said it was an impressive tape. "If these banks can issue equity, they're going to get healthier," she said.
Macke said the fight is fixed for the longs because the Obama administration has said "we're going to make the banks work." He said he would continue to go long banks in the foreseeable future.
Lee asked the panel whether they saw any more catalysts to drive the bank stocks. Adami mentioned two: the bottoming of the housing and toxic assets getting less toxic. He cautioned investors to take some profits because these stocks have shot up 60% to 70% in the past month to month and a half.
Lee brought in Christopher Thornberg, a principal with Beacon Economics, to discuss the April jobs report. He said the national economy is improving, with signs showing consumer spending hitting bottom, the big runoff in inventory and the ease in the decline in the jobless rate.
Furthermore, he said the aggregate real disposable income number is higher than it was a year ago. He said the jobless rate will peak at 10% and the recovery will take a couple of years.
Finerman warned that the Obama administration's next problem will be inflation after another weak Treasury auction. "I don't know how they can fund (the issues) without massive inflation," she said.
Terranova said the challenge for
chairman Ben Bernanke will be to anchor the yields at low rates. "Does Treasury step in to buy Treasuries to keep the yields low?"
Another problem facing the administration will be oil prices, which rose 10% for the week. Terranova observed that the rise is not being driven by demand but by index fund buying.
as a buy. He sees the stock, which rose 2.8% today to $39.20 even after a downgrade, headed to $45.50, although it may not be a straight line.
Finerman noted the "enormous" $1 move in natural gas in the past two weeks and wondered whether it was due to short covering. She mentioned two stocks that were up today:
, up 5.7%, and
, up 6.65%.
Adami said the same applied to
, which jumped 7.25%.
Terranova said Obama may have to tap the Strategic Petroleum Reserve if oil gets above $60 a barrel.
Lee brought in Jeff Lindsay, an analyst with Sanford Bernstein, who raised the price target for
to a lofty $600. The stock closed at $407 today, up 2.7%.
The reasons for the optimistic call? Lindsay says Google's revenue per clicks should improve now that there is a bottoming out in the financial services, health care and auto sectors.
He told Adami that a 25 multiple for the stock is justifiable based on the company's earnings potential. Indeed, he sees a few years of solid growth ahead for Google that will be paced by the accelerated use of wireless phones and 3G wireless phones.
Steve Grasso, managing director of institutional trading at Stuart Frankel, appeared on the show to talk about the run in financial stocks. He said money is moving into bank stocks with the stress tests now in the rear window and the banks taking steps to raise capital with equity and debt offerings.
He said money is shifting from the retail and tech stocks into the financials. He cautioned things could change if unemployment rises to 9.5% to 10%, but as of now, he sees the S&P hitting 950 easily.
Whitney Tilson, managing partner for T2 Partners, came on the show to comment on Berkshire Hathaway's earnings, which beat expectations. He said Berkshire's investment portfolio rebounded after the end of March, with the help of Wells Fargo and
, which has more than doubled.
He said he's trimming his position on the stocks because there is less of a margin of safety. Still, he said he likes them for their potential earnings power.
Ronald Kruszewski, chairman and CEO of Stifel Financial, spoke briefly about the future of Wall Street. He said its future will hinge on reducing systemic stresses such as the administration's misguided adherence to the doctrine of protecting banks that are too big to fail.
He also the derivatives problem needs to be dealt with and argued for increased disclosure in short sales.
In the final trades, Macke liked
and Wells Fargo. Adami was for Baker Hughes while Finerman went with
. Terranova liked
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