Recap of Fast Money, Tuesday June 24.
UPS and UBS
The Dow closed on the lowest level of consumer confidence in 16 years and a profit warning from UPS. Karen Finerman says oil affects every portion of the economy and is the cause of the general malaise. There were rumors of a UBS takeover which brought a rollover in financials and Najarian noted a strong performance in the regionals. However, regarding UBS, Najarian would ignore the rumors and discussed the intensive speculative options trading; "It seems that someone is looking for UBS to come back on the 2 for 1 split that was unannounced."
How Now Dow Chemical (NYSE:DOW)
Dow is raising prices 25% and Dylan Ratigan this move “creates anxiety about inflation.” While Dow has pricing power, Adami wouldn’t buy it, but recommends steel.
In spite of UBS’ raised target for Potash, shares in the company fell. Syngenta and DuPont announced a deal to develop a more effective insecticide. Macke discussed Intrepid Potash’s trading at more than double volume, rising and then tapering off. Najarian dismissed this action as mere rotation.
Ratigan said Kroger’s numbers were “surprisingly lovely,” and Macke explained the supermarket chain is trading at on cheap multiples and is protecting its margin from rising food prices “because they’re working off an incredibly low base.” Finerman noted Wal-Mart is also doing well with its food business because of its pricing power. However, this power “comes back to bite the customer,” said Macke.
Tuesday was a good day for Merck, which saw its stock rise on the popularity of its drugs, and Novo Nordisk, on a Goldman upgrade, and Novartis increased on an upgrade from Exane BNP. Since picking up Merck on a drop hasn’t worked, Adami would buy Celgene.
Picture This:Eastman Kodak (EK)
Eastman Kodak is using extra cash from the sale of its imaging business to buy back a quarter of its stock. Finerman praises the move, but Macke said Kodak "is trying to pick the bottom in a stock that has been on a multi-decade downward trend."
What Will the Fed Do?
While the consensus is the Fed will leave interest rates unchanged, the futures market said there would be a 90% chance of a rate hike by August. However, Jim Iurio says this data doesn’t reflect what he is seeing and says the current economic climate means the Fed can’t raise rates until winter. Macke says the whole thing is a confidence game, and rates won’t be raised. Guy Adami thinks rates will be tightened by the end of the year. CNBC’s Steve Liesman said those hoping for harsh language against inflation will be disappointed, and thinks the things the Fed won’t say will be good for stocks. Liesman thinks the language will be subtle, although he believes rates will be hiked in August or September. Macke thinks the market will react well on understated language. Guy Adami would buy gold if the Fed is not hawkish. Najarian agrees in theory with Adami, but would choose another commodity.
Although it faces stiff competition from Google and Apple, Research in Motion is expected to give strong earnings report and its new smartphone, Blackberry Bold, should give it an upside for the rest of the year, according to Tim Long senior research analyst for Banc of America. Good news for RIM will be good news for Apple and Nokia, since the smartphone market “has a lot of winners and segmentation.” Although he agrees RIM will report a strong quarter, Najarian says he is hoping for a pullback.
In spite of a Harvard study showing that housing may go from bad to worse, Adami noted starts are around the 1 million mark, which may signal a bottom. For those who like risk, he would recommend CTX, DHI, KBH and TOL. Finerman says CTX is the least levered of Adami’ s recommendations, and she would look at balance sheets before buying, Najarian hates the sector and would stay away.
While conspicuous consumption was the name of the game in the 80s, the trend now is to show off about saving money. On this trend, Macke would buy WMT, COST and BJ.
Guy Adami says he has a feeling Bernanke will change his tune at the Fed meeting and would be on the lookout for a lower dollar. On RIM’s report, Macke is not worried about competition from Apple’s iPhone. Pete Narjarian doesn’t think a potential shake-up in CSX’s board will matter to the company as long as coal remains strong. On BBBY’s earnings, Jeff Macke says “specialty retail is the place love goes to die.” Pete Najarian thinks Oracle will deliver strong earnings. In spite of lower home prices, Adami thinks Wednesday’s new home sales data may be better than expected.
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