Recap of Fast Money, Wednesday July 2. Click on a stock ticker for more analysis.
Dow Falls Down
The Dow finished at bear Market levels as rumors of a possible GM bankruptcy spread and the surge in oil. Guy Adami posited that perhaps the sell off happened because of the shortened trading day on Thursday which will be “very illiquid.” Najarian blamed oil; “When oil surged, the market began to drag down and fall apart.”
Fears that higher interest rates and a slowing consumer might cause a recession to spread globally brought down commodities, and the group expressed concern over the global growth story. Karen Finerman said BHP and Rio Tinto had been pushing up coal which finally “took a bath” on Wednesday. She thinks rotation has begun. Seymour thinks the general trend for coal has been up and suggest the selloff might have been profit-taking. He observed ag charts POT, MOS, SYT and AGU don’t look pretty. However, he recommended ICA, and Guy Adami likes CAT long-term but admits it might have a short-term drop. Najarian cautioned investors to buy puts for protection.
GM (GM) on the Skids
Merrill Lynch says a bankruptcy for GM is “not impossible” as the auto giant needs to raise $15 billion in cash. Adami regrets saying yesterday that GM was a trade, but thinks it may be a trade in the future.
The Nasdaq dropped 2% and fell into bear market levels, partly thanks to a poor showing by Google and Microsoft. Sandisk, however, was up 6% and options activity suggests there are expectations this stock will continue to do well, said Najarian. Dell’s CEO bought 4.5 million shares, but Adami says he can’t get bullish until Dell breaks resistance at $24.
Negative Nvidia (NVDA)
Nvidia’s shares fell 20% after hours on the announcement that it will not meet expectations due to lagging demand, a product delay and a price war. Finerman noted the company had a $125 million revenue miss and wouldn’t touch the stock. Najarian thinks NVDA could get bought.
Lehman continued to rise after Morgan Stanley recommended it as a buy earlier in the week. Oppenheimer analyst Meredith Whitney cut her estimates on MER because of write downs and stated predicted the bank will lose money. Adami says he has yet to see capitulation in Lehman and wouldn’t run into the stock. Najarian cautioned those who have tried to find a bottom in financials have been “beaten with a stick.” He doesn’t think the sector should be bought until there are signs of strength in FNM and FRE.
Oil rose to $144 in the afternoon, although the inventory numbers were released in the morning. The group discussed the reason behind the mysterious rise. Joe Terranova says it was a short squeeze, while Tim Seymour attributes the move to investors getting long oil on the dollar’s drop. They recommended getting into integrated oils such as Suncor or Exxon, since oil will eventually come down.
Microsoft is again approaching Yahoo, and this time it is talking to NWS or TWC about buying the company’s search business. Piper Jaffrey analyst Gene Munster thinks in the end, the deal will go through, because Microsoft needs Yahoo. He predicts a deal by the end of the year at $28-$31 a share. “They have to buy the whole thing,” adds Munster. This is a true platform. Yahoo! is number one in display and number two in search. We think all this talk about breaking up Yahoo is absurd.”
Jobs Number Won’t Be Working
Thursday’s job number is expected to show a 50,000 drop in non-farm jobs, but Mike Darda, MKM Partners chief economist says this decline is already priced in, and there is no reason to go bearish on this news. Given the slow-growth, high inflation environment, he would buy junk bonds and avoid treasuries.
All American Stock: McDonald’s (MCD)
McDonald’s has been a survivor in the economic storm and is one of Guy Adami’s all-American stocks because it has been instrumental in spreading American cuisine abroad. The stock is still going strong on a valuation basis, and Adami says it is a buy.
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