Bad news was good news in the stock market Tuesday. Fears of a major writedown at Merrill Lynch ( MER) and a bearish growth outlook from Wal-Mart ( WMT) couldn't stop the Dow from climbing 100 points. The team at CNBC's "Fast Money" analyzed the day's events for investors.
Fears for Financials
Investors continue to be worried about the future of Bear Stearns ( BSC). CNBC reporter Charlie Gasparino cited the following four reasons for concern about Bear Stearns.- The 6% stake by Chinese Bank Citic didn't push enough cash into Bear to provide the liquidity investors were looking for.
- Investors fear a large fourth-quarter writedown.
- Alleged improper trading at now defunct Bear hedge funds could lead to unfavorable settlements.
- Questions about the health and future of CEO Jimmy Cayne.
Wal-Mart Blunder
Wal-Mart is currently holding an analyst meeting, and Wall Street is buzzing with how poorly the company is responding to analysts' questions. CNBC's Margaret Brennan joined the "Fast Money" crew to discuss Wal-Mart. Brennan explained that the discount retailer cut capital expenditures to $15 billion, but Wall Street was looking for even deeper cuts. She expects CEO Lee Scott to calm investors when he speaks on Wednesday.
Deal Trades
There are three big Wall Street deals that are close to getting done. Deals like the taking private of Cablevision ( CVC), Oracle's ( ORCL) bid for BEA Systems ( BEAS) and the takeover of Washington Group ( WNG) by URS Corp ( URS) are in play. Karen Finerman maintains that Cablevision needs 50% of non-Dolan family shareholders to vote in favor of the deal for it to be completed. She admits she has been burned by Dolan investments in the past and she holds no position in Cablevision here. However, Finerman does own options and stock in BEA Systems. In her opinion, BEA Systems did the right thing by not being intimidated by Oracle's offer. Finally, Finerman believes URS will have to raise the takeover price on Washington Group to get the deal done. Out of all three deals, Washington Group is the one she would buy for a trade. (To see how well a portfolio that focuses on these deals performs, check out Merger Arbitrage Candidates portfolio at Stockpickr.)Word on the Street
Amazon.com ( AMZN) fell 8% after hours in spite of reporting a strong quarter. Pete Najarian says while Amazon didn't blow out the earnings this time, it still posted a monster quarter. Macke would love to be a buyer of Amazon, but is waiting for it to go down 10 points. United Parcel Service ( UPS) reported a rise in third-quarter profits, but the stock finished flat Tuesday. Guy Adami maintains that what is good for Amazon is good for UPS. He thinks the floor on UPS is the mid-$70's. Research In Motion ( RIMM) exploded 10% higher after announcing plans to sell the BlackBerry device in China. Research In Motion has signed a deal with Alcatel-Lucent ( ALU) in order to do so. With that in mind, Najarian tells investors to wait for the stock to pull back, not to chase it here. Juniper Networks ( JNPR) fell after hours on earnings that came in short of Wall Street estimates. Adami advises buying Juniper in the mid-$30s. AT&T ( T) trades up 2% after profits soared 42%. Macke views the iPhone's success as the reason for the strong profits out of AT&T. EMC Corp ( EMC) and VMware ( VMW) are set to report earnings before the bell Thursday. Adami believes that if EMC doesn't beat earnings, the stock could take a hit. Najarian predicts that VMware will crush the earnings number, and he advised investors to take some profits on EMC. Macke is still holding EMC long into the quarter. Yahoo! ( YHOO) currently controls a 40% stake in Chinese online play Alibaba.com. Alibaba is set to go public next month and will be the largest Chinese Internet IPO in history. In Najarian's opinion, the trade is to own Yahoo!. Macke is also long Yahoo!. Burlington Northern Santa Fe ( BNI) profits rose 8% as cost cuts offset soft demand. Wall Street whale Warren Buffett currently holds a stake in BNI. Finerman is looking to buy CSX Corporation ( CSX) and she doesn't want to chase BNI. Adami also believes CSX looks interesting here.