'Fast Money' Recap: Vulnerable Companies

NEW YORK (TheStreet) -- The S&P 500 slid 0.65% on Tuesday while the Russell 2000 fell 1.53%. 

On CNBC's "Fast Money" TV show, Dan Nathan, co-founder and editor of riskreversal.com, pointed out how disappointing retail companies' results have been. These companies have a "mulligan" on first-quarter results because of the weather but will have to prove themselves down the stretch. 

Steve Grasso, director of institutional sales at Stuart Frankel, argued retailers do not typically have catalysts going into the summer, the slow time of the year. He added that U.S. GDP is unlikely to grow 4% in 2014.

Brian Kelly, founder of Brian Kelly Capital, pointed out the 18% slide in shares of Dick's Sporting Goods (DKS). He suggested that Cabela's (CAB) and Callaway Golf (ELY) are both vulnerable, based on negative comments from DKS management about its hunting and golfing categories. 

Guy Adami, managing director of stockmonster.com, said Home Depot (HD) traded well on Tuesday after missing on top- and bottom-line estimates. However, he suggested leaving the stock alone until it breaks out over $80, or fades below $75 and moves lower.

Colin Gillis, senior technology analyst at BGC Financial, called Microsoft's (MSFT) new Surface 3 tablet a "nice device." He said if the company can sell a reasonable five million units per year, it should boost revenue by roughly 6%. He warned that the June quarter, which is usually quite good, could have some negatives in it due to the closing of its deal with Nokia (NOK) and lower sales. 

Nathan said shares of Microsoft could fall to the mid-$30s on an earnings miss, but will likely get support from the company's share buyback program. 

Grasso said it makes sense for Microsoft to release hardware products, which usually have lower margins, because it has such good margins in its cloud and software business. 

Salesforce.com (CRM) beat on revenue and earnings expectations. Adami pointed out the company's solid booking numbers and margins but did not like that the stock has failed to rally off of the results. He suggested the price action may be a warning sign. 

Nathan called CRM a well-run company but he was a seller on its rich valuation and lack of significant earnings. Kelly said he is currently not a buyer of CRM or any other cloud stock. 

Adami said General Motors (GM) continues to find support near $32. However, if that level fails it could be headed much lower. He is not a buyer. Nathan added that it looks like it may be headed to $30. 

Kelly was a seller of Facebook (FB) on the announcement of its video advertisements. He also said the sideways price action has not been very encouraging for the bulls. Nathan added users will not take kindly to the video ads. 

Bill Fleckenstein, president of Fleckenstein Capital, said there is always risk to the markets for a flash crash, due to high frequency trading. He added that eventually the markets will fall significantly because the Federal Reserve has pumped in too much liquidity, as it did in the early 2000s and in 2008. The Federal Reserve is not alone -- central banks around the world have been doing the same thing, which could make the situation worse. 

Kelly agreed, and he is short S&P 500 future contracts and long the Japanese yen. 

Nathan reasoned that Wynn Resorts (WYNN) is headed lower after it breaks below its $200 level of support. However, he suggested not trying to sell it until it rallies back toward the $210 or $215 level.

Gene Munster, senior research analyst at Piper Jaffray, said Amazon's (AMZN) investment into Yummy77 for $20 million is "chump change." However, it's a wise move for Amazon because it lets people in China run the operations rather than trying to do it from the U.S. He added that many of Amazon's U.S. strategies do not sync with China -- and it has found that out the hard way. Regarding its recent selloff, Munster said shares of Amazon are at good levels for investors who have a five-year outlook, citing a rapidly growing e-commerce market. 

Adami said shares of Amazon could retest the $345 level, but whether it will is like "flipping a coin." He is not trading the stock. 

Orbitz Worldwide (OWW) fell 7% and was the first stock on the show's "Pops & Drops" segment. Adami said the stock is not expensive but investors should wait until after it prices its secondary offering before determining whether to buy the stock. 

Carnival (CCL) climbed 1%. Grasso said he is not a buyer, yet. 

Pandora (P) jumped 2%. Nathan said the stock is attractive, given the valuation of the rumored Beats Electronics acquisition by Apple (AAPL) for $3.2 billion. 

Molycorp (MCP) fell 4%. Kelly was not a buyer.

U.S. Steel (X) dropped 4.5% and was the featured stock on the show's "Street Fight" segment. Guy Adami defended the stock, saying steel demand has not been met by supply due to the weather. 

He admitted the steel sector in general has been weak, but U.S. Steel has catalysts because of cost cutting and improved operating efficiency. He added the stock has a very low valuation.

Gordon Johnson, managing director of Axiom Capital, called U.S. Steel a "great short right now," pointing out that China is exporting a lot of steel -- meaning, it is not in demand in the country. He added that China is the biggest global consumer of steel and reasoned that steel prices have lower to go, especially in the U.S. He concluded U.S. Steel is at risk of making zero profits in the second half of 2014. 

Grasso and Kelly agreed with Johnson. 

Nathan said he did not like shares of Caterpillar (CAT) because the company is too levered to emerging markets. He also pointed out the bearish options activity in the stock. 

Adami said large-cap value stocks such as CAT, Wal-Mart (WMT) and International Business Machines (IBM) are starting to show signs of weakness.

Grasso said he is not a buyer of First Solar (FSLR) until it can find support above its 100-day simple moving average at $59.62.

Adami said F5 Networks (FFIV) has been a buy every time it gets near $98. However, the series of "lower highs" in the stock price has him concerned. 

For their final trades, Grasso was a buyer of Tesla Motors (TSLA) and Nathan was long September call spreads for Pandora. Adami was buying Newmont Mining (NEM) and Kelly said to buy the ProShares UltraShort S&P 500 ETF (SDS).

-- 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.

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