The stock market plunged on Friday as recession fears continue to spread on Wall Street. The market has now officially started off its worst year in history. The Dow racked up its fourth triple digit loss of the year falling 246 points and the NASDAQ closed down 48 points. The team at CNBC's "Fast Money" took a look at financial stocks, the defense sector and gave a preview of MacWorld.

Pete Najarian mentioned he used the higher volatility Friday to start buying some financial stocks. Jeff Macke declared the trend in the market is down and it's going to be harder to make money. Guy Adami thinks Friday felt like capitulation in the stock market and he wants to start playing offense next week.

Financial Sector Smackdown

Najarian explained that MasterCard ( MA) and Apple ( AAPL) were great examples of good stocks that were unjustly hit on Friday. Karen Finerman says in a market like this stay away from the mid-cap stocks and look for stocks with solid balance sheets.

Bank Of America ( BAC) bought distressed mortgage giant Countrywide ( CFC) for $4 billion. Macke thinks the move to make on financials is to sell them into the strength and buy glaring weakness. Najarian recommends buying shares in Bear Stearns ( BSC) and Citigroup ( C) and selling the out of the money calls. Finerman mentioned that she was very surprised that MBIA ( MBI) was able to raise $1 billion.

Next week Wall Street will hear from Citigroup and Merrill Lynch ( MER) when they both report earnings. CNBC's Charlie Gasparino joined the "Fast Money" crew to discuss his take on the financials. Gasparino says his sources are telling him that Citigroup is going to receive $15 billion from a consortium of investors. He feels that Citigroup will come clean on layoffs and how big their write-downs will be on Tuesday. Finerman disclosed she has a tiny position in Citigroup.

Gasparino mentioned that he thinks Merrill will take a $12 billion write-down for the current quarter and $20 billion for their total write-downs. Adami favors MER over C. Najarian suggests the best way to trade Citigroup is to buy the stock and sell the calls against it for a hedge.

Defense Budget

The new defense budget from the President is set to be reported next month. Adami advises buying the best defense companies on the planet like Lockheed ( LMT), Raytheon ( RTN), General Dynamics ( GD) and L-3 Communications ( LLL).

(Check out this portfolio for defense budget stocks on Aerospace & Defense.)

MacWorld trade

Apple is set to hold its largely anticipated Macworld conference next week. Najarian mentioned that Apple has been slaughtered for the past two weeks. He says the normal move for Apple during Macword is 8%, so he is recommending buying the $180 call and selling the $185 call. Najarian also noted that the chatter on Wall Street is that iPhone sales will be big for Apple.

Good news

Healthcare stocks put in a solid week off the back of the JPMorgan Healthcare Conference. Najarian sees more upside for Pfizer ( PFE) but he cautioned investors on Merck ( MRK). He also recommended investors take a look at Cepheid ( CPHD) and Celgene ( CELG). Adami favors Gilead Sciences ( GILD) and Humana ( HUM).

Gold cleared $900 for the first time Friday. Adami explained that he has traded gold for 15 years and it always ends in tears. He isn't sure on when the gold trend will end however. Najarian advises limiting your risk and put on call spreads in the mining stocks like Newmont ( NEM).

Not so good news

McDonald's ( MCD) fell 5% after a Friedman, Billings, Ramsey analyst said the stock was fully valued. Adami thinks MCD is an international story and should be bought on the weakness. Macke counsels holding your nose and buy MCD here. Najarian thinks the analyst at Friedman is dead wrong on MCD's growth prospects going forward.

Tiffany ( TIF) hit a 52-week low Friday after the upscale retailer cut its 2007 guidance. Finerman explained that TIF has been a big beneficiary of a declining dollar, but the dollar could be done going down. She favors DSW ( DSW) in the retail sector because they have lots of cash and a solid growth story. Macke doesn't like the risk/reward on Tiffany in the current market environment. Najarian wants nothing to do with trading the retail stocks right now.

Taiwan Trade

Taiwan has been a big underperforming versus China and among all of the emerging markets. What is the trade as Taiwan gets ready to hold legislative elections this weekend? Tim Seymour explained that Taiwan's opposition Nationalist Party is currently in the lead and is perceived to be friendlier to China and better for big business. The election happening this weekend is comparable to the U.S. primaries and the general election is set for March. Seymour says the way to play Taiwan is to buy iShares MCSI Taiwan Index ( EWT), AU Optronics ( AUO) and Taiwan Semiconductor ( TSM).

Pops & Drops

This segment of POPS&DROPS highlights the most extreme stock moves of the week.

Pops - Pfizer ( PFE) traded up 5%. Adami points out that PFE has a great balance sheet and the stock will be a pop for the rest of 2008.

Altria ( MO) traded up 6% as investors looked for a safe haven in defensive stocks. Finerman remarked that this was as defensive as you get with a great balance sheet.

Drops - McDonald's ( MCD) fell 5% after a Friedman, Billings, Ramsey analyst said the stock is fully valued and heading to $53. Macke would buy the dip.

Juniper ( JNPR) fell 14% after the network equipment maker suffered a downgrade and lost its COO. Najarian explained that COO Stephen Elop left to go to Microsoft and that's why the stock took a hit.

Alliance Bernstein ( AB) fell 6% after the asset manager reported a drop in fees for its hedge funds. Adami says AB has room to go much lower.

Intel ( INTC) fell 3%. Macke would buy the shares on this dip.

Big 5 Sporting Goods ( BGFV) fell 15% after the sporting goods giant missed Wall Street expectations for profits and sales. Finerman would avoid this stock.

Jamba Juice ( JMBA) fell 10% after the smoothie store missed revenue estimates. Macke explained it's a bad sign when a company misses estimates this soon after an IPO.

Fast Fire

The crew revisits past trade ideas and some didn't do as well as planned.

On December 5th Finerman recommended Crocs ( CROX) on valuation, but the stock went down 30% since her call. She isn't giving up on the shoe maker and she disclosed she is still long.

It was December 4th when Macke said buy The Gap ( GPS). He was dead wrong and the stock has gone down 5% since his recommendation. Macke is now changing his mind saying get out of The Gap.

On January 3rd Adami said buy Intel ( INTC) in front of the next earnings report. Adami was wrong and Intel has fallen 20% since his call. Adami is sticking with the chip giant even after the plunge.

This past Tuesday Najarian disclosed and recommended shorting Washington Mutual ( WM). Najarian was off the mark and the stock has rallied 14%. He is recommending covering any short position in WM.

Quicker Then the Ticker

The team though, gets it right as well.

On January 4th Najarian said he liked Novartis ( NVS) for its cheap P/E of 10. He was right on the mark and the stock has traded up 6% since his call.

On January 4th Macke picked Costco ( COST) for a play on a weaker economy. He found a winner with COST and the stock has traded up 6% since the call.

It was January 3rd when Adami recommended buying Apollo Group ( APOL). He was dead on and the stock has risen 11% since his recommendation.

Back on December 26th Finerman disclosed and recommended shorting commercial real estate with Simon Property Group ( SPG), iShares Dow Jones Real Estate ETF ( IYR) and Taubman Companies ( TCO). She hit this call out of the park and all three stocks have fallen 10% or more.

Final Trade

The team ends a rotten week in the market with some potentially good ideas to trade.
  • Finerman recommends going long SPDR Trust (SPY) and short iShares Russell 2000 Index Fund (IWM).
  • Najarian likes DuPont (DD) for a scientific play on the agriculture sector.
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