Tech stocks continued to shine Wednesday in a choppy trading session. The Dow Jones Industrial Average lost 82.99, or 1.04%, to 7,886.57, while the S&P 500 dropped 6.53, or 0.77%, to 843.55. The Nasdaq edged up 2.27, or 0.77%, to 1,6646.12.
Melissa Lee, the moderator of CNBC's "Fast Money" TV show, said technology stocks continued to break away from the rest of the market, and there was no better evidence of that than Apple ( AAPL) which moved higher in after-hours trading on a strong earnings report. Jim Goldman, CNBC's Silicon Valley bureau chief who listened in on the conference call, said the company said it was the best non-holiday quarter it has ever enjoyed. Particularly impressive was the 36.4% in gross margins and the continued strong sales of Macs to first-time buyers, he said. Goldman said the company continues to perform well and struck an optimistic tune in its report. Guy Adami said Apple shares have enjoyed a great run, up 47% for the year, but he said the prudent step here would be to take profits. "I can't go piling on the back of these earnings hoping they've just sand bagged the next quarter," he said. Karen Finerman said it's hard to get excited about the stock, when it is up so much. Lee shifted the discuss to bank stocks which led the market lower in the final hour of trading. Tim Seymour said the numbers for Morgan Stanley ( MS), which reported a loss, weren't that bad.
Finerman agreed, adding the pullback in bank stocks is to be expected after a great run. Indeed, she expects a further retrenchment for these stocks in the days ahead. Seymour said he's most concerned about those banks that will be affected by the stress tests which are coming out shortly. He noted Wells Fargo ( WB) has $480 billion worth of consumer credit exposure. Looking ahead to Thursday's round of earnings, Lee asked Heather Bellini, a UBS software analysis, for her prognosis of Microsoft ( MSFT). Bellini said she's concerned about Microsoft's numbers for the next fiscal year, noting "they're not going to guide on the call." She said PC sales have been bad, but expects Microsoft to come in a little better than people expected. She said the company's ability to control costs will excite investors. Still, she said the sentiment is pretty bad on the name and the short interest is high. According to Bellini, Steve Ballmer, Microsoft's CEO, is very conservative about the company's large cash cushion, adding she doesn't expect the company to do much in the way of a stock buyback. Finerman, who's long on Microsoft, vented her frustration with the stock: "I don't know whether I want it to go up or down. I find it so frustrating." Shifting to the blue chips, Adami singled out Honeywell International ( HON) because it was up as much as 6% at one point on a "lousy day." He called it the "best industrial stock no one has heard of."
He said the best way for investors to play the stock is to get out half of their position before earnings on Friday so that they will have the flexibility to buy more if it dips or get out of it if it rallies. In the biotech sector, Adami was high on Gilead Sciences ( GILD) saying it has the world's best HIV franchise. He also said Celgene ( CELG) is worth on a look after a recent upgrade from Sanford Bernstein. Najarian said Amgen ( AMGN) is worth a look because of its low valuation. Finerman noted that Roche Holdings ADR ( RHHBY) was down after some disappointing results on Avastin that showed its use in the treatment of colon cancer did not lower the risk of the return of the cancer. Lee asked Dan Niles, co-CIO of Alpha One Capital Partners, to comment on Amazon.com ( AMZN) ahead of its earnings Thursday. He said he would not buy the stock ahead of earnings because it is trading at a multiple of more than 30 with revenue growth of only 20%. Niles said investors would be better off putting their money in other stocks like eBay ( EBAY), which is up 6% and trades at a multiple of 10. In the oil space, Finerman commented on the disconnect between Oil Services HOLDRs ( OIH) and United States Oil ( USO). She said the oil services index is performing so much better because it looks further ahead than USO, which has dramatically underperformed because it is tied to spot oil prices.
Adami briefly commented on some stocks benefiting from President Obama's policies. They included CREE ( CREE), which is up 62% year to date and a ripe acquisition target. He also liked Broadcom ( BRCM), a manufacturer of semiconductors for wired and wireless communications. In a segment on clean coal tech, Najarian singled out Eastman Chemical ( EMN) as company to watch out for in the gasification field. Roger Corrado, an independent commodities trader, came on the show to talk briefly about opportunities to trade in soft commodities like coffee, sugar, cocoa, corn, soybeans and wheat. He said the best investment vehicles for these trades would be options and ETFs. In the final trades, Seymour said to short Potash ( POT). Adami was long Yum! Brands ( YUM), while Finerman long Emulex ( ELX). Najarian liked Alpha Natural Resources ( ANR) as a buy. "Check out "'Fast Money' Portfolios of the Week" on Stockpickr every Thursday.