Fast Money Recap - Trading the Times Square Ball (12/30/08)

Recap of CNBC's Fast Money Tuesday December 30.

The Last Hurrah: GM (GM)

Increased confidence in a bailout for autos brought the Dow up and investors jumping into large-cap technology stocks caused the Nasdaq to rally. While home values and consumer confidence plunged, the news did not seem to affect the markets on Tuesday. Jeff Macke, as usual, was far from sanguine; “We’re 4600 points away from break even, exclaims Jeff Macke. We can do it,” he said sarcastically. Pete Najarian was not too excited about the rally because the trading was light until the final minutes. Quint Tatro noted Treasuries were up, and says there will not be a sustained rally until that stops happening. Joe Terranova says the market is digesting all the bad news of the last six weeks.

Autos Still Running: GM (GM), Toyota (TM), Autozone (AZO), AutoNation (AN)

On news the government is going to give an extra $1 billion to GM and is taking a $5 billion stake in its financing arm, GMAC, Joe Terranova says the real play is Toyota. Pete Najarian agrees and adds 0% for five years should get people into showrooms. Tatro said he prefers Autozone or Autonation on the premise that people will repair their cars instead of buying new ones.

Bottom Fishing for Materials: Alcoa (AA), FreePort McMoRan (FCX)

Materials, the second-worst performing sector after financials got a boost on Tuesday as investors bottom-picked fallen stocks such as Alcoa and FreePort McMoRan. Macke said these stocks are good for a trade, not for a buy and hold strategy. Joe Terranova agrees and says 2009 will be characterized by hit and run trading. Najarian says a lot of commodities are trading like they are going out of business, but they might be good for the short-term.

Macy’s (M) Parade

In spite of record low sales, many retail names rallied, including Macy’s. Macke said to beware since many of these companies are going bankrupt.

Dead Cat Bounce for Housing: iShares Dow Jones US Utilities (IDU), Homebuilders ETF (XHB), ProShares UltraShort Utilities (SDP)

The Homebuilders ETF rose while the S&P/Case-Shiller Home Price Index fell on Tuesday. However, Tatro calls the pop a “dead cat bounce.” Najarian says homebuilders will continue to decline with short rallied now and again. Tatro thinks utilities will also be declining and would be long the UltraShort Utilities.

Oil Back Down: Exxon (XOM)

In spite of Mideast conflict and the Saudi’s plan to cut oil supplies, the price of oil dropped $1. Joe Terranova predicts a drag on oil on Wednesday and Tatro says he is short integrated oils like Exxon.

On the Ball: Philips (PHG), Cree (CREE)

What’s the best way to trade the huge ball that drops in Times Square every New Year’s Eve? It may seem like a trivial question, but the famous ball uses 32,356 L.E.D. light bulbs which are made from semiconductor material instead of neon or filaments. This means that to lighting the ball requires only as much energy as heating two home ovens. This year the plan is to keep the ball in Times Square aloft all year round so it can glow in colors appropriate for certain seasons. Jon Najarian would play this new landmark with Cree or Philips.

I Want a New Drug: Health Care Service Selector SPDR (XLV), Merck (MRK), Lily (LLY), Pfizer (PFE), Gilead (GILD), Celgene (CELG), Teva (TEVA).

Health Care Services Selector SPDR is up 7% while the rest of the market is down 3%. Is Pharma going to be big in 2009? The sector is a famous safe haven, since no one wants to cut back on medicine when times are tough. Merck, Lily and Pfizer are all up lately. Najarian notes that pharma companies also have strong dividends. He would also look at companies that are the focus of the JP Morgan healthcare conference and adds he likes Teva, Celgene and Gilead.

The Obama Factor 2010: First Solar (FSLR), Energy Conversion Devices (ENER), Eastman Chemical (EMN), Claymore/MAC Global Solar Index (TAN), Fuel Systems Solutions (FSYS), Westport Innovations (WPT), Cummins (CMI)

While it is no secret Obama is interested in green technology, it might take a while for the stimulus package to create a real impact on the sector. The Fast Money group made some picks for 2010. Pete Najarian says First Solar, Energy Conversion Devices and Eastman Chemical are well-run and could have a substantial upside. Quint Tatro likes TAN, Fuel Systems Solutions, Westport Innovations and Cummins.