The markets brushed off some disappointing tech earnings and avoided a selloff on Friday. At the close of the trading session, the Dow Jones Industrial Average rose 23.95, or 0.26%, to 9093.24, while the S&P 500 was up 2.97, or 0.03%, to 979.26. The Nasdaq fell 7.64, or 0.39%, to 1965.96. Joe Terranova said on CNBC's "Fast Money" TV show that the market was off to the races after the volatility index softened up and the dollar didn't prove to be a safe-haven trade. For a break-out of stocks recently mentioned on the "Fast Money" TV show, check Dan Fitzpatrick's "3 Stocks I Saw on TV."
Steve Grasso said the sentiment of the panel on Thursday was that there would be a selloff today, but that didn't happen because the trading floor didn't buckle against the shorts and the rally "went straight up." Tim Seymour said the market action reinforced the positive trends that have pushed the market higher in recent days, including the high percentage of earnings beats, good housing numbers and encouraging economic data from Europe. However, Melissa Lee, the moderator of the show, said the market is "reading what it wants to read," adding the housing and earnings beats could easily be read the other way. Pete Najarian said investors used the pullback as an opportunity to get themselves back in. As an example, he pointed to Juniper Networks ( JNPR), as a stock that had a huge runup to earnings, got crushed today but then bounced back, ending up for the day. Lee shifted the discussion to American Express ( AXP) and Capital One ( COF) which reversed higher after disappointing earnings reports the day before.
3 Stocks I Saw on TV
Terranova said that's because the attention has moved from consumer loans to non-performing asset growth and problem jumblo loans for banks like Wells Fargo ( WFC) . Lee added that American Express said that its chargeoffs for the third and fourth quarters will be better than analysts expected. Seymour said the reversal was more about short covering, a sentiment Grasso shared. Najarian said the better trade was with Visa ( V) and Mastercard ( MA) because their transactions businesses continue to work and they have "zero exposure" to the credit problems of the likes of American Express. Grasso said he's never seen a market like one he's seen in the past two weeks. He said hedge funds have been betting on a pullback that has not materialized. Looking ahead to the next two weeks of earnings, Najarian put in a cautionary note, warning that that market could turn around suddenly. He said the prudent thing to do would be to purchase some put protection to guard against that possibility. There was a spirited disagreement among the panel about Microsoft. Lee and Grasso were not convinced that the software giant was out of the woods. Seymour, on the other hand, liked Microsoft's pipeline and business mix and said they will be a plus in the second half. Both Najarian and Terranova used the pullback today buy shares of Microsoft. Terranova reminded viewers that another hurdle for the markets will be the jobless report that comes out on August 7. He advised taking some profits off the table before the report.
Lee brought in Jerome Zirin, head of equities for UBS Wealth Management Research, for his assessment of the market. Zirin said the impressive rally has been driven by two forces: earnings that were beating low expectations and a relatively undervalued market. He said companies are doing the job they are suppose to do in a recession: trim cost structures in preparation for the day when they can begin to grow revenues after the recession ends. He is predicting 2% GDP growth in the second half. He said his firm is overweight in emerging markets and commodities in its asset allocation. He said its U.S. strategy calls for procyclical and proglobal strategies. He said he particularly likes energy, tech and consumer discretionaries going forward. To get a perspective of the rapidly changing auto industry, Lee invited John Krafcik , acting president and CEO of Hyundai Motors America. Krafcik acknowledged stiffer competition, now that the major U.S. auto companies have restructured their operations. He said his company is a late entry in the hybrid car competition but is coming out with its own hybrid brand in the U.S. that features a lithium polymer battery that none of its rivals has. Despite the aura over hybrid cars, he said his company is focused on making affordable fuel-efficient cars, of which its hybrids cars will play a role, but not a major role. With the integrated oils reporting earnings next week, Christopher Zook, chairman and CEO of Caz Investments, offered his assessment. He said he expects "eye-popping" declines year-over-year and tepid outlooks. He said he likes the oil services names better than the integrateds, noting one way to play it would be with PHLX Oil Service Sector ( OSX).
Lee invited Kevin Johnson, CEO of Juniper Networks, to discuss his company's latest earnings. He said his company expects its gross margins, which he said were down a point or two in the past quarter, to return its normal range. He said its service provider business should pick up over time as their clients increase their capital investments to deal with the increase in Internet traffic. Lee shifted the discussion to Obama's efforts to get through a healthcare bill. Scott Nations, president of Nationsshares, said the current logjam benefits the healthcare companies but the situation still looks risky. He said he likes Pfizer ( PFE), which hasn't participated in the rally, as a trade. In the final trades, Seymour liked TOTAL ( TOT) while Grasso was long Chevron ( CVX). Terranova liked Kroger ( KR). Pete Najarian was long BP ( BP).