Financials Fly High - Fast Money Recap (7/17/08)

Recap of CNBC's Fast Money, Thursday July 17.

Thursday was a bullish day for investors as the markets took on gains. The Dow rose 1.85% to 11,446.66, the S&P 500 rose 1.2%, ending at 1260.31, while the Nasdaq increased 1.2%, finishing at 2312.30.

 After the Bell:  Microsoft (MSFT), Merrill Lynch (MER), Google (GOOG), Yahoo! (YHOO), Schlumberger (SLB)

 On CNBC's Fast Money TV show, traders began by discussing the names that reported after the bell. Dylan Ratigan mentioned Microsoft, Merrill Lynch. Google did well. The group thought Microsoft was getting worse as the conference call goes on. Continuing with Merrill, Ratigan said that it might be responsible for ending the bank rally.

Peter Najarian agreed that "financials may stop moving." Referring to Merrill's ability to keep reporting writedowns, Guy Adami asked, "How many kitchen sinks does John Thain have?"

Jeff Macke weighed in on investors, saying, "Of course they'll sell off the financials on the news."

Najarian said that selloffs are not over and that they will "continue through the rest of the year."

Karen Finerman said that Microsoft was "a little disappointing," and that she does not "love two quarters in a row of them being lower."

Adami said that Microsoft's major problem is that it does not tell what is going on. He said that it must "communicate with the Street better."

Finerman said that the company's problem is that it has not resolved the Yahoo! issue. When it does, the stock will move, she said.

Najarian said that Microsoft was "not doing well on the earnings front," and "don't buy this name thinking you're going to get a monster pop."

Ratigan moved the topic to oil, which he said has had its biggest drop since 2003.

Macke said that the "trend is broken for near term in crude." He continued, "I am not here to fight trends."

Ratigan, wondering what the trade on this would be, asked the traders for help.

Adami spoke on Schlumberger: "If you want to avoid it, OK." He said that he would wait for earnings.

Najarian said that we're in a "rotational process right now." He said that when crude broke, the financials broke and that they were "almost identical."

Next, Ratigan asked if the traders were more inclined to add to positions or sell.

Adami said that "today, tonight will tell a lot about what happens tomorrow morning."

Najarian said that "we're not out of the woods, you have to sell," and "you have to take profits in this market."

Macke agreed with Najarian saying discipline has continued to work in these markets and  discipline is the way to go.

 How to Play Energy: Potash (POT), Exxon Mobil (XOM), ConocoPhillips (COP), Schlumberger (SLB)

 Ratigan led the traders into the topic of energy trades.

Macke said to look at Potash because the "stocks are way ahead of themselves."  Potash remains a great company. He reiterated that the trend is broken in crude and said there's no reason to fight it. Stay on the sidelines for Schlumberger – the rotation is in.

Adami took a different perspective and said to look at Exxon Mobil as a long. He said "now is when you should be buying Exxon Mobil or ConocoPhillips."

 Ring Tones: Nokia (NOK), Motorola (MOT), Palm (PALM), Research in Motion (RIMM), Apple (AAPL)

 Ratigan directed the traders toward cell-phone trades that are working.

Najarian spoke about Nokia, saying that he "had to sell into this one." Nokia beat estimates and owns 40% of the market. He said it finally rose and the company has 10 new smartphones coming out in several months. In his opinion Motorola and Palm are gone; Research in Motion and Apple are still competitive.

 Earnings Hits:  Apple (AAPL), Google (GOOG), Merrill (MER)

 Guest Brad Hintz, a securities analyst with Sanford Bernstein, discussed Merrill. He said that it was a "pretty disastrous quarter," and that this means bad news for everyone. He continued saying that these stocks have been pretty badly beaten up and that he does not "see any reason why anyone would want to get into brokerage firms."

Following Hintz was guest, Gene Munster of Piper Jaffray. Discussing Google, he said that it's "quarter wasn't that bad," but they "will be in the penalty box." Speaking on Apple, he said that its fundamentals "are doing phenomenal," and he is "still long going into Monday." When Ratigan asked about the technology sector, he said that the "key here is you have to be a stock-picker."

Hearing this, Macke weighed in on Google, saying that when companies get old, "they can't do it every quarter." On Apple, Macke said that "we're going to need more specifics," regarding its margins. He said that they are going from high-margin projects to a low-margin area. They will be in the penalty box for a few months but ultimately investors will return.  There is no urgency to buy Google.

 The show's final guest, Addison Armstrong, spoke on oil. Ratigan questioned whether the bull market for oil is dead. Armstrong said that this past week's trading activity was due to "liquidation, pure and simple." He said that weak balance sheets are driving this and that the investment banks are attempting to raise capital. Addison suggested to "watch the technicals now," because we could be talking $117 next week due to a "cascading trade."

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