Fast Money Recap - Is Pharma Healthy? (12/3/08)

Fast Money Recap, Wednesday December 3.

Coke (KO), Cisco Systems (CSCO), Biotechnology Index (BTK), Freeport McMoRan (FCX), Biotechnology Index (BTK), US Gyp (USG), Philip Morris (PM), Altria (MO)

On bad news from companies like Freeport McMoRan, stocks rose higher as investors rushed into safety plays such as Coke. The Biotechnology Index rose 3%. Freeport announced it was suspending its dividend, cutting its capital expenditure and slowing production of copper. The Treasury Department said it would stimulate home buying by lowering mortgage rates, which, according to some rumors, may fall as low as 4.5%. Pete Najarian declared the housing market, which caused the current economic decline, might reverse it, and the increase in home demand is good news for commodities. However, Karen Finerman expressed skepticism and says when stocks rise higher on news of a government plan, they usually end up sinking lower. Those who don’t mind taking a risk should buy US Gyp, she said. Jeff Macke would sell the news and lamented that the rules change every day. Guy Adami predicts the Dow will go 100 higher if it breaks 897, and Finerman recommended Philip Morris and Altria as dividend plays. She would avoid high-dividend stocks with a lot of debt and poor fundamentals. Najarian says double digit dividends are dangerous.

GM (GM), Ford (F) and Union Concessions

As GM and Ford are negotiating and aid package with Congress, the United Auto Workers Union has decided to allow job security protections and delay payments to be diverted into a retiree healthcare trust to facilitate the companies’ plea for aid. Guy Adami warned that GM shares could go to zero. “It’s over!” declared Macke.

Amazon (AMZN) and Sears (SHLD): Not So Fast

Amazon shares jumped on the news that Cyber Monday was a success, but Jeff Macke said Amazon, on a fundamental basis, cannot be bought and warned investors to get out of Sears.

Research in Motion (RIMM) Feels the Pain

In spite of RIM having to cut its earnings estimates, shares closed higher. However, Pete Najarian would hold off buying because RIM has been a very volatile stock. “You’ll have time to get in,” he said.

Is Pharma Healthy?: Johnson & Johnson (JNJ), Pfizer (PFE), Celgene (CELG), Wyeth (WYE), Merck (MRK)

On Monday’s news Johnson & Johnson is buying breast implant maker Mentor, there is speculation that other companies flush with cash such as Pfizer and Wyeth might make similar moves. Pete Najarian would buy Pfizer and Karen Finerman says she holds Pharmaceutical HOLDRs and iShares NASDAQ Biotechnology Index. Adami likes Celgene, but Macke, bearish as usual, commented that Pharma is a “safety group that has left most investors dead on arrival.” Merck is the pharma to watch, since it will give guidance on Thursday, and CNBC’s Mike Huckman thinks that because the stock is down 55%, any news will move the markets. However, Leerink Swann analyst Seamus Fernandez in a research note expects few surprises from Merck given poor sales for its leading drugs.

Retail on Sale? Abercrombie & Fitch (ANF), Gap (GPS), Ross Stores (ROST), Wal-Mart (WMT), Target (TGT)

While Black Friday sales were better than expected, margins suffered because of deep discounts to spur on shoppers commented Ken Perkins, president of Retail Metrics. He advised looking at margins and earnings when retailers report on November sales. Susquehanna strategist Stacey Gilbert says she sees bullish volatility buying in Gap and thinks Abercrombie and Ross are also stocks to watch. Warmer weather and the fact that Thanksgiving occurred later in the month might also have hurt sales. Wal-Mart’s low prices and aggressive advertising campaign has made the giant retailer the winner. Target is expected to post a 9% loss; the range of loss it had forecasted was 6-9%. J.C Penney and Kohls are expected to report a loss of 14%, apparel retailers, 11.6 % and children’s wear 12.3%.Analysts expect an overall decline in November same-store sales of 2.5% according to according to Thomson Reuters data; this would be the largest decline since Thomas Reuters began collecting the data in 2000.

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