The markets were buoyed Thursday by the global relief package from the G-20 meeting and relaxation of mark-to-market accounting rules.
The Dow Jones Industrial Average jumped 216.48, or 2.79%, to 7,978.08, while the S&P 500 added 23.30, or 2.87%, to 834.38. The Nasdaq climbed 51.03, or 3.29%, to 1,602.63. Melissa Lee, the moderator of CNBC's "Fast Money" TV show, said the rally was influenced by the G-20's "money party" and positive economic news out of China that sent materials and commodity stocks soaring. Guy Adami said the rally is still intact as money is being put back to work. But Jeff Macke had reservations about the rally because it represented "capitulation" from those investors who felt they missed the rally and were desperately chasing stocks. "We're 25% off the low's and we're making a big deal that the bottom might be in." Karen Finerman said she wasn't chasing anything in today's market. She said the markets were helped by comments by Ken Lewis, the CEO of Bank of America ( BAC), who did a pretty good job of making the case that the end is not here for his bank and many other big banks. JJ Kinahan said the volatility index, which remained high, is not a believer in this rally, especially with the national unemployment numbers coming out on Friday. Adami said the strong action in the commodity markets is telling you that the money is moving into real and soft commodities as well as equities and out of fake commodities like gold. He said it was important to note that gold was down while the dollar was being "obliterated."
Is it the bottom of the market? Finerman said that remains to be seen as the jobless number is still very important and a cloud of uncertainty still hangs over the auto industry. Macke said this is not a "stable" market, adding it's more like the "mirror image of the selloff panic we had before." He said it doesn't make sense for Macy's ( M) to be up 25% after a downgrade from Moody's. Lee noted that Research In Motion ( RIMM) shares were up 20% in after-hours trading after it posted better-than-expected earnings. Adami offered kudos to the Goldman Sachs ( GS) analyst who made the call on March 5 when the stock was at $43. But he pointed how confusing a situation it is to make the call, saying a report from JP Morgan Chase ( JPM) had put out a underweight rating and a $40 price target. Finerman said one point worth noting in the RIM earnings report was that 50% of the users were non-corporate users. Jim Goldman, a CNBC business reporter, agreed. He said that the earnings report was impressive because RIM has been able to maintain margins of 40% to 43% in a difficult environment, and because President Obama, who carries around Blackberries, has made the device "cool." The iShares Dow Jones Transportation Average ( IYT)shot up 8% today, prompting Adami to say it was the biggest move since 1939. "Now you have to say whether the move is too much," he said. For example, he said Federal Express ( FDX) closed up $9 to $49, even though a recent Credit Suisse report said the company might have to contribute $1 billion to its pension fund in 2010 and its EPs for 2010 will be $2.25. At a 20 multiple, you looking at a stock just over $40, he said.
Finerman made the same point with CBS ( CBS), which was up 20% even though nothing had changed with the tough advertising revenue issues that has dogged the media giant. Joe Terranova appeared on the show to discuss a better-than-expected PMI number from China that suggests some expansion. Terranova said investors should be cautious with oil, copper and ag names, which have been on the rise. "You want to buy them on pullbacks," he said. Macke said the market continues to rally despite bad news. As evidence, he noted how the Dow rallied after a credit downgrade for GE ( GE) on March 22; a March 26 report of a drop in the fourth-quarter GDP; a March 31 report of a drop in home prices; and a ADP report on April 1 of 742,000 jobless in March. Lee shifted the discussion to one of the big business stories of the day -- the decision by the Federal Accounting Standards Board to change its mark-to-market accounting rules to allow banks to value assets using flow models and their own judgment rather than market prices. Joe LaVorgna, chief US economist for Deutsche Bank, said the decision, with respect to the securities side of the ledger, doesn't represent much of a change. Still, Adami said the rules provide a perception of a change in the landscape, and Finerman said she believes the rule changes will be helpful. Kinahan said he would remain long on financials, in particular Wells Fargo ( WB) and JPMorgan, which, he said, understand their business.
Kinahan noted the strong options activity in the pharma sector, with Forest Labs ( FRX) up 30% today. He cited two reason for the action: Pharma stocks haven't been participated in the rally and they are a pretty good defensive play in a sell-off. In the final trades, Macke was for Wal-Mart ( WMT), while Finerman was for ProShares Ultra Short Real Estate ( SRS). Kinahan said to sell Microsoft ( MSFT) after its rally. "Check out
"'Fast Money'Portfolios of the Week" on Stockpickr every Thursday.