The markets closed on the upside Wednesday after a topsy turvy trading session.
The Dow Jones Industrial Average gained 89.60, or 1.17%, to 7,749.81, while the S&P 500 added 7.63, or 0.95%, to 813.88. The Nasdaq rose 12.43, or 0.82%, to 1,528.95. Jeff Macke said on CNBC's "Fast Money" TV show that the market displayed signs of stability despite enduring a beating at times. Pete Najarian said the financials once again were the backbone that lifted the market to the positive side. He said when the Financial SPDR ( XLF) is matched up against the S&P 500, it looks like the same chart. Guy Adami said he still believes the S&P is heading to 900. Meanwhile, Najarian reminded the panel that the volatility index is still trading at levels that could trigger violent moves, up or down. Dylan Ratigan, the moderator of the show, shifted the discussion to tech, the best performing sector this year. Najarian said he's been impressed with the power of the sector, adding he particularly like the data storage area, including names such as Western Digital ( WDC) and Seagate Technology ( STX). Seymour said restocking and China are two themes behind a pickup in demand in semiconductor chips. He said Taiwan Semiconductor ( TSM) is bringing workers back to work as demand picks up. Ratigan brought in Jon Najarian for his thoughts about the level of trading confidence in this market. Najarian said he feels very good about the market. He said he's a fan of Treasury Secretary Timothy Geithner's plan to deal with toxic assets, and he said he's delighted that there may not be a need to relax mark-to-market accounting rules.
Najarian also liked the exciting activity going in the semiconductor sector. In particular he likes stocks such as San Disk ( SNDK), EMC ( EMC), Advanced Micro Devices ( AMD) and Seagate. Ratigan asked Mark Zandi, chief economist for Moodys.com, about the Geithner's plan. Zandi said he liked the Legacy Loans Program because it gives investors a return given the leverage provided by the plan. He said the auction system will work because the stress tests will force the banks to lower the prices of their toxic assets. "We'll get bids up and asking prices down," he said. According to Zandi, the auction gives the government the potential to buy a lot of assets with a little bit of help from private investors. He agreed taxpayers will be put at risk in these deals but the tradeoff will be a banking system that starts lending again. If the auction system works, banks should be heading toward stability and credit will be "really flowing" next summer, he said. Ratigan invited Heather Bellini, software analyst at UBS to talk about Microsoft ( MSFT) and other tech stocks. She said Microsoft, which is up 4% this month, has enjoyed a little bounce as it caught the shorts off guard. She said the stock has been in the doldrums because of consumer weakness in PC market and an enterprise market, where it is faring a little better. She said the company has stopped giving guidance, including guidance for fiscal 2010, which analysts had expected in the conference call next month.
She said Microsoft could make a nice move ahead of Windows 7 if there are signs of life in the PC market. And she thinks the Carol Bartz, the new CEO of Yahoo! ( YHOO) is going to want to sell the entire company to Microsoft. Bellini had high marks for Oracle ( ORCL). She likes its operating margin expansion because of its dominance in maintenance work, and she sees the company becoming very aggressive in acquisitions in the next three to six months. She had a dim view of VMware ( VMX), which her firm has rated a sell. She said the company's growth curve is starting to flatten and it is facing pricing pressure. She expects a decline in the year-over-year license revenues this quarter and next, and she thinks the Street's license revenue and EPS estimates are too high. "Until they come down, I'm not a buyer," she said. The panel touched on an uptick in new home sales in February that provided some impetus to homebuilder stocks and housing-related stocks like Home Depot ( HD). Adami said the data shows the rate of decline is slowing. He also said affordability comes into play at a certain point. "There are people who want to buy homes," he said. Ratigan felt the data was getting misinterpreted and that a better reflection of what happened last month can be had by looking at a year-over-year comparison, which shows a big falloff in sales, compared to a month-to-month comparison.
Seymour said the euphoria over today's data will be erased if the number of jobless claims surges to 650,000 Thursday. In a segment called the "Consumer's Mind," Macke noted some stocks that are doing well in a tough economy that causes people to stay at home. They included Netflix ( NFLX) and Amazon.com ( AMZN) for its popular Kindle. In the final trades, Macke was for Wal-Mart ( WMT), Adami for Kansas City Southern ( KSU), Seymour for Wimm-Bill-Dann Foods ( WBD) and Najarian for Industrial Select Sector SPDR ( XLI). "Check out "'Fast Money' Portfolios of the Week" on Stockpickr every Thursday.