'Fast Money' Recap: Netflix at Crossroads

NEW YORK ( TheStreet) -- The markets started a new month on the downside ahead of Friday's jobs report.

The Dow Jones Industrial Average fell 119.96, or 1.03%, to 11, 493.57. The S&P 500 dropped 14.47, or 1.19%, to 1,204.42. The Nasdaq slid 33.42, or 1.30%, to 2546.04.

Herb Greenberg, CNBC's senior stocks commentator, said on the "Fast Money" TV show that Netflix ( NFLX) may have reached a crossroads after Starz Entertainment decided not to renew its contract to provide movies. Netflix shares were down more than 8%.

For a breakout of some stocks from a recent "Fast Money" TV show, check out Dan Fitzpatrick's "3 Stocks I Saw on TV."

3 Stocks I Saw on TV

Greenberg spoke to two short sellers who said that Netflix's recent push into international business might have been the result of fears of not being able to renegotiate provider content deals. He also said it's possible Starz may have gotten competing bids from other parties such as cable and satellite TV providers.

But Brian Kelly argued it might be time to get into Netflix because it is finally drawing the line on what it will pay for content, thus paving the way for decent margins.

Guy Adami said the shorts have been waiting for this moment and that he would be seriously concerned if the stock fell below $203. Jon Najarian agreed, saying there may be piling in on the downside if the stock slips below $200.

Stephen Weiss said Netflix is "nothing without content." He called it a "broken growth stock" that is selling for a ridiculous multiple of 40 to 50 times this year's earnings. He said he would sell the stock and short it at this level.

Shifting to the broader markets, Kelly looked ahead to Friday's jobs report. He said report is treading a fine line because a high jobs number would negate the need for QE3 while a bad number would leave the government with very few options. Jon Najarian said President Obama wouldn't want to face the American people if the jobs number is bad.

In any event, Adami said the market will either be 100 points higher or lower this time next week. "It won't stay here."

Jon Najarian said volatility is still above 30% level, paving the way big, broad market moves.

Andrew Tilton, a Goldman economist, said his company slashed its jobs forecast to 25,000 from 50,000, citing a number of factors including a soft ADP report and drop in the ISM index. He said the nation needs a 2% GDP rate to keep the unemployment rate stable but the exact opposite has happened, with hiring fading recently.

He said a weaker jobs report will increase the odds of Fed action. He said more needs to be done in housing and monetary policy.

Melissa Lee, the moderator of the show, brought in Tavis McCourt, of Morgan Keeagan, to comment on Research In Motion's ( RIMM) 30% rebound in August.

McCourt attributed RIM's turnaround to the launch of its Blackberry 7 in the U.S. and Europe and the success of its Blackberry messenger service in emerging markets.

Adami said he would rather own Qualcomm ( QCOM). He said RIM has shown a tendency to overshoot to the upside and downside. In this case, he's afraid it might be shooting to the upside.

For a look at some key technicals in September, Carter Worth, a chartist with Oppenheimer, said the S&P has retraced about 50% from its recent decline and appears headed to 1250. He also said he expects copper to decline 10% as it heads to $3.80. And he sees gold dropping to $1,600 after a recent bounceback.

Jon Najarian noted that Finisar ( FNSR) was up 10% in afterhours trading because it had beaten Street estimates and offered positive guidance for the full year. He said some tech analysts look at the stock as a leading indicator of tech spending.

Najarian said the rise in the stock may indicate that overcapacity in the fiber optic space was under control. He said he was not ready to step in yet.

Lee brought in Jeff Palma, UBS head of global equity strategy, for his assessment of the market before Friday's jobs report. He said markets can move higher but he underscored the uncertainty of the economy that has endured a tough recovery.

He said volatility is still a concern, adding his expectations that the volatility index will settle in the 20's. He said he is looking for companies with exposure to global demand. In particular, he is looking for a balanced portfolio of cyclical and defensive stocks of companies with strong balance sheets, dividend growth and a growth profile.

Pete Najarian said that McDonald's ( MCD), Coca-Cola ( KO) and Caterpillar ( CAT) fit that profile.

Lee brought in Enrique Salem, president and CEO of Symantec ( SYMC) to talk about a recent company survey of global companies that showed that 21% of them seeing an increase in cyber attacks.

He said today's attacks are broad-based, targeting intellectual property including stealing source code, patents and formulas and other expensive IT.

He said there have been attacks on critical infrastructure such as a power grid or financial infrastructure.

He said his company has exceeded Street estimates the past four quarters in a market that is seeing an increase in spending on cyber security.

In the final moves, Weiss said he was betting against steel, including AK Steel ( AKS) and US Steel ( X). Jon Najarian advised investors to take advantage of the situation if the markets make a big move Friday up or down. Adami liked Church & Dwight ( MCP). Pete Najarian said he saw some more upside in Cliffs Natural Resources ( CLF).

--Written by David Tong in San Francisco.

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