The stock market put in its second day of gains on Thursday after the Federal Reserve Chairman Ben Bernanke said the Fed was ready to drop interest rates to avoid a recession. The market was also helped by news that Bank of America ( BAC) is in talks to buy depressed mortgage giant Countrywide ( CFC). The Dow finished up 117 points and the NASDAQ closed up 13 points.The crew at CNBC's "Fast Money" looked for profitable trades within this difficult market. Reporter Mike Huckman came on the show to talk about Genentech and the team explored contrarian trades. Pete Najarian said it was a phenomenal day on Thursday for the financial sector. He also mentioned that gold hit a new high on Thursday and the mining stocks continue to work. Jeff Macke thinks the market hasn't proved anything yet and he is no less cautious then he was 2-days ago. Guy Adami says the reality is that corporate balance sheets never looked better and cash ratios are at their best since the early 90's.
Genentech TradeGenentech ( DNA) is set to report earnings Monday after the market close. CNBC Pharmaceuticals reporter Mike Huckman joined the "Fast Money" crew to discuss his take on Genentech. Huckman explained that Genentech's stock doesn't move off of its earnings, but it will move off of positive sales numbers. Huckman also mentioned that Biogen Idec ( BIIB) will get a decision from the FDA on Friday or Monday on Crohn's disease drug Tysabri. The FDA decision will also move Tysabri partners Elan ( ELN) and PDL BioPharma ( PDLI). Najarian says trade individual names not a basket for Tysabri.
Against the Trend TradeThe "Fast Money" traders took a look at some counter trend trade ideas for the financial, consumer and housing sectors. Adami recommends going against the trend with financial stocks like Citigroup ( C) and Merrill Lynch ( MER). Macke favors Morgan Stanley ( MS). Finerman suggests buying a $30 put option a year out and buying the stock for Citigroup. Najarian likes Fannie Mae ( FNM) for a moderate risk and high reward trade. In the consumer sector Adami says go with MasterCard ( MA). Macke prefers Blue Nile ( NILE). Finerman thinks a huge contrarian trade could be to go long Bon-Ton ( BONT). Najarian favors IAC/InterActiveCorp ( IACI) which he thinks has huge upside. For the housing sector Adami likes Home Depot ( HD) for its cheap valuation. Macke thinks Lowes ( LOW) is better than Home Depot. Finerman says if you're really a contrarian take a look at Hovnanian ( HOV). Najarian thinks Lennar ( LEN) could explode because they're sitting on 90,000 homes that are ready to move. (Take a look at this contrarian portfolio on Stockpickr.com Janus Contrarian.)
Housing TradeIf some of the major bond insurers file for bankruptcy, the housing market could be sent into a major bear market. If this happened, Najarian would cover short positions in the bond insurers because he sees M&A coming into the sector. Macke offers getting long the vultures like Berkshire ( BRK.B) or Blackstone. Blackstone ( BX) traded up 9% after the private equity firm bought hedge fund GSO Capital Partners for $930 million. Blackstone directors also approved a $500 million share buyback program. Finerman thinks the buyout and buyback are both interesting moves by Blackstone. Najarian mentioned that Goldman Sachs had Fortress ( FIG) on its buy list at $30 and then downgraded the stock on Thursday at $13. He recommends fading Goldman and buying Fortress and also buying Blackstone at $20. Adami agrees that Blackstone at $20 is a buy.
Consumer WoesWal-Mart ( WMT) and Target ( TGT) traded higher Thursday in the face of the worst holiday shopping season in 5 years. Finerman thinks the retail sector is way overdone on the downside. She feels that American Eagle ( AEO) looks attractive for its high cash levels. Macke warns investors to exit the retail stocks. American Express ( AXP) announces a pretax charge of $440 million for the fourth-quarter due to a slowdown in cardholder spending and rising delinquencies. The stock traded down 7% after hours on the news. Adami says the market will selloff MasterCard ( MA) on this news, but he would look to buy MA around $185. Macke and Najarian agreed that this data shows the consumer is in trouble and the U.S. is in a recession.
Word on the StreetDelta Air Lines ( DAL) explodes 18% higher after the Wall Street Journal reported it's looking to start merger talks with UAL ( UAUA) and Northwest ( NWA). Najarian says if you're going to play this, use options and take a look at Northwest for a trade. Yahoo ( YHOO) trades up 6% after the New York Post reported that Microsoft ( MSFT) might be looking to make a bid for the global internet portal. Adami declares Yahoo is a lottery ticket at $24 but worth a shot. Najarian explained that this rumor has been around for awhile. Indian automaker Tata Motors ( TTM) introduces a new car priced at $2.500. The new car will be called the Nano and it will be the world's cheapest car.
Pops & DropsPops - UPS ( UPS) traded up 4% off a Bear Stearns upgrade. Adami favors UPS. United States Steel ( X) traded up 8% after KeyBanc Capital Markets upgraded the stock from buy to aggressive buy. Adami continue to like X. Gymboree ( GYMB) traded up 9% after the kids' retailer raised its fourth-quarter profit outlook. Finerman was impressed with the performance. Acuity Brands ( AYI) traded up 5% on no news. Adami favors AYI. Drops - The Gap ( GPS) fell 7% after the retailer reported December same-store sales fell 6%. According to Macke, the turnaround is not here yet for GPS. Ruby Tuesdays ( RT) plunged 14% after the casual dining chain posted a quarterly loss and lowered its 2008 forecast. Finerman remarked that casual dinning is a disaster and RT has a lot of debt. Harris Corporation ( HRS) fell 11% after JPMorgan downgraded the stock. Najarian would stay away. Barnes & Noble ( BKS) plunged 19% after the company lowered its profit guidance due to lower same-store sales over the holidays season. Macke thinks BKS is starting to look cheap and he would cover short positions. WD-40 Company ( WDFC) fell 13% after the firm missed quarterly profit estimates. Najarian explained that WDFC is having problems in North America. Men's Wearhouse ( MW) plunged 30% after the firm cut profit forecasts for the fourth-quarter and full year. Macke warns viewers to avoid specialty retailers.
Face2FaceInvestors often have questions of their own to be answered. Don writes, "Is Office Depot ( ODP) a good hedge in a down economy?" Macke doesn't like the stock and he thinks it's a value trap. Finerman says she has been looking at ODP, but the problem is that the company has a lot of exposure to California and Florida. Jackie from New York asks, " American Express ( AXP) took quite a beating on Thursday. Do you go with the flow and sell?" Adami doesn't like this stock and he thinks it's probably going lower. Derek from Kentucky writes, "Why did GameStop ( GME) do poorly after it raised expectations and had great holiday sales?" Najarian thinks this is a great opportunity to buy GME off of profit taking. John from Colorado wants to know, "You talked about Blue Nile ( NILE) as a buy. What about Tiffany ( TIF) and Zale ( ZLC)?" Macke mentioned that ZLC terrifies him and he just doesn't know about TIF. He likes NILE as a high risk play. Finerman says of the three, she likes TIF the best. Tony from Texas writes, "Will Apple ( AAPL) move next week for Macworld and should we load up on Google ( GOOG) as well?" Najarian doesn't think Google is a trade going into Macworld. He mentioned that he will talk about trading Apple in front of Macworld on Friday's show.