'Fast Money' Recap: A Bad Case of China

NEW YORK (TheStreet) -- The S&P 500 dropped nearly 1% in Thursday's trading session but was able to close off of session lows. 

On CNBC's "Fast Money" TV show, Brian Kelly, founder of Brian Kelly Capital, said weak Chinese PMI data sparked today's selloff in U.S. equities. He added that the selloff is not over, especially with earnings seasons here and an upcoming debt ceiling debate. 

Steve Grasso, director of institutional sales at Stuart Frankel & Company, said there didn't seem to be panic in today's selloff. He added that each dip has been met with buyers and that support near 1,820 in the S&P 500 has held.

Guy Adami, managing director of stockmonster.com, said it would still be healthy for the S&P 500 to pullback to the 1,760 area. 

Karen Finerman, president of Metropolitan Capital Advisors, said pullbacks are a good thing. She added the market should do fine as long as earnings go well. 

Carter Braxton Worth, chief market technician and managing director at Oppenheimer & Company, was a guest on the show. He said the S&P 500 should pull back to about 1,750 for the bull market to remain "healthy." He added that the iShares MSCI Emerging Markets ETF (EEM) looks likely to break lower, which is not good for U.S. stocks. 

Grasso reminded investors that utility stocks and emerging market stocks got hit hard last time tapering talks arose. He said he's a buyer of Southern Company (SO). 

Microsoft (MSFT) beat on top- and bottom -line estimates. Daniel Ives, senior analyst at FBR Capital Markets, said the PC market seems to have bottomed and Windows 8 could demonstrate growth over the next six months. He added that the cloud business did well but the stock is likely to remain rangebound until a new CEO is named. 

Adami said that at current levels there isn't that much risk to being long MSFT.

Kelly said both Intel (INTC) and MSFT are doing better, which might set up for well for Hewlett-Packard (HPQ), which reports earnings next month. 

Grasso advised investors to see if MSFT can hold above its 50-day moving average before stepping in to buy. Finerman said when a new CEO is elected for Microsoft the company may lower expectations going forward, which would be bad for the stock price. 

Starbucks (SBUX) beat on earnings but missed slightly on revenue. The company reported strong sales in China, but weaker-than-expected comp sales in North America. Management said it is "well positioned" for the retail shift to online shopping. 

Grasso said low coffee prices have been a big aid for the company and he wants to see if the stock can hold $72 before he buys it. Adami said that operating margins were great and the quarter was "fine." The stock sets up as an interesting long candidate, he suggested. 

Kelly said it wouldn't be surprising to see the stock trade back up to $80 but he would sell it short at that level if it did. 

Netflix (NFLX) closed at an all-time high of $388 Thursday after beating earnings estimates on Wednesday night. 

Adami said that analysts still do not understand the stock and many investors are overlooking the international business segment. He added that a pullback to $360 would be nice, but that the stock will likely continue higher over the next six months. 

Finerman said she sold out of her short-term long position in J.C. Penney (JCP) because the retail sector has been weak and the company looks like trouble in the longer term. 

Kelly said that South America could be in trouble based on currency issues, financial problems and political unrest. Specifically, he cited Venezuela and Argentina, which could negatively affect Brazil. To take advantage, he suggested investors sell the iShares MSCI Brazil Capped ETF (EWZ), buy crude oil or sell the iShares Latin America 40 ETF (ILF). 

Adami said the airline stocks, Priceline.com (PCLN) and biotech should do well in 2014. 

Despite the big selloff today, the Dow Transports Index made new highs. Worth said the Transports are overbought over the very long-term. He suggested taking profits. 

Adami disagreed that the airlines would suffer in the near term. He added that consolidation in the industry and higher traveling will allow the airlines to continue doing well. 

Kelly said investors could short the regional airlines as a hedge for owning the major airlines. He suggested selling Sky West (SKYW) as a good example. 

BlackBerry (BBRY) was the first stock on the show's "Pops & Drops" segment. Grasso said the stock looks overextended at current levels. 

Union Pacific (UNP) jumped 3%, but Adami suggested taking profits in the stock. 

Facebook (FB) dropped 1% on a report that its user base would erode over the longer term. The company rebutted this claim but Kelly agreed that it would need to stay innovative in order for that notto happen. 

Finerman said she would rather be long GNC Holdings (GNC), which fell 2%, than Vitamin Shoppe (VSI). 

Intuitive Surgical (ISRG) fell in after-hours trading after it refused to give guidance during its conference call. Finerman said it is "never a good sign" when a company has "limited visibility" in its business, which was the reason provided by management. 

Kelly said investors who are bearish on the materials sector could sell the iShares MSCI South Korea Capped ETF (EWY) or copper. Adami said investors could buy U.S. Steel (X) below $25. 

For their final trades, Finerman is buying Citigroup (C) and Grasso said to buy United Rentals (URI). Kelly is buying gold and Adami continues to like McKesson (MCK) on the long side.

-- Written by Bret Kenwell in Petoskey, Mich.

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Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter. Focuses on short-to-intermediate-term trading opportunities that can be exposed via options. He prefers to use debit trades on momentum setups and credit trades on support/resistance setups. He also focuses on building long-term wealth by searching for consistent, quality dividend paying companies and long-term growth companies. He considers himself the surfer, not the wave, in relation to the market and himself. He has no allegiance to either the bull side or the bear side.

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