Stock Market Can Still Rally Despite Falling Oil Prices

NEW YORK (TheStreet) -- West Texas Intermediate continued its slide Tuesday, trading as low as $75.84 per barrel. But despite the decline, Jon Najarian, co-founder of optionmonster.com and trademonster.com, says the stock market can still continue rising. 

On CNBC's "Fast Money" TV show, Najarian said the market may decline in the short term due to fluctuating oil prices, but in the intermediate to long term, the decline in energy prices will be better for most businesses and for consumers. 

Lower oil is obviously bad for the energy sector, said Stephanie Link, chief investment officer of TheStreet and co-manager of the Action Alerts PLUS portfolio. However, 70% of GDP is driven by consumers, so if they have fewer expenses that will be good for the economy. As long as earnings remain strong, stocks can go higher. 

"It depends if falling oil prices are due to oversupply or lack of demand," said Jim Lebenthal, president of Lebenthal Asset Management. If lack of demand, then the economy could be in trouble. Fortunately, it appears that lower oil prices are due to oversupply.

When oil prices settle down, the stock market is likely to "snap back," said Pete Najarian, co-founder of optionmonster.com and trademonster.com. Right now the energy sector is weighing on the S&P 500. 

The broader market is lower Tuesday but one stock that's higher is Alibaba (BABA) . The company reported in-line earnings per share results and beat on revenue expectations. 

The company has "incredible growth," Pete Najarian said. He likes the stock on the long side. Link added that China revenue climbed nearly 50% while mobile revenue and user growth was very strong. 

Not higher after reporting earnings is Herbalife (HLF) . The company missed on EPS and revenue but John Desimone, the company's CFO, says Herbalife is not done growing. 

Revenue grew 4%, but that figure would have been 7% if not for the hit from Venezuela's currency woes, he said. The company is "adding some elements" to its business model that are resulting in short-term pain but will ultimately lead to long-term gain, he said. With the stock down some 40% on the year, the company may begin buying back stock, but that's still to be determined. 

There's so many questions around this company and its business model, Link said. Investors should look elsewhere because there are plenty of better companies. Lebenthal added there's a credibility issue with management. He's not a buyer but he did note Herbalife is still profitable and generating growth. 

Office Depot (ODP) was the first stock on the show's "Trader Blitz" segment after the company beat top- and bottom-line estimates and raised guidance. Lebenthal said that with the stock up 15%, he'd rather buy Staples (SPLS) instead. 

Foot Locker (FL) is lower after its CEO announced his resignation. Pete Najarian said the stock is a buy on this pullback. Link agreed. 

Priceline.com (PCLN) is down 8% after showing weakness in Europe. Jon Najarian said investors should "stay away in the short term." 

Link called shares of Sprint (S) "way too expensive," given the company isn't growing Ebitda and is spending so much on persuading customers to use Sprint's services.

Another stock that's lower after earnings is Michael Kors (KORS) . The company beat on analysts' estimates but reported weaker-than-expected guidance. Operating margins are lower and U.S. same-store sales, which account for 80% of revenue, were lower. The stock looks dead for the time being, Link said. 

Jon Najarian disagreed, arguing the company continues to expand in Europe, increased gross margins and should benefit from a rising U.S. dollar. He is a buyer of the stock and selected it for his final trade.

For their final trades, Pete Najarian is buying Foot Locker, Link said to buy Unilever (UN) , and Lebenthal is a buyer of San Juan Basin Realty Trust (SJT) .

-- Written by Bret Kenwell

Follow @BretKenwell

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