'Fast Money': Traders get defensive
David Tong | [email protected]
The Dow Jones Industrial Average fell 198.67, or 1.63 percent, to 11997.70. The S&P 500 dropped 26.66, or 2.11 percent, to 1234.35. The Nasdaq was also down 52.83, or 1.99 percent, to 2596.38.
Joe Terranova said on CNBC's "Fast Money" that it was "a lousy" market day in which he lost money and pared down his exposure to equities, especially in the energy space. After saying yesterday that he expected the S&P 500 to push above its 200-day moving average, he said he was going to remain defensive for the rest of the year.
Guy Adami said 1225 is the level investors now have to trade against in the S&P 500. He said bank stocks remain a sell on any rally.
Stephen Weiss said the selloff was triggered by a show of disunity behind the European Central Bank rate cut and comments from ECB President Mario Draghi that inflation was running nicely above 2 percent and that the central bank would not be the last resort as a buyer of bonds.
Gerard Cassidy of RBC Capital said investors took profits and went to the sidelines after the dismal news from Europe. But he said Citigroup (C) and JP Morgan (JPM) stand to gain in market shares as European banks shrink their balance sheets and raise capital.
Melissa Lee, the moderator of the show, noted Goldman Sachs' downgrade of Transocean (RIG). Dan Dicker, a senior commentator for TheStreet.com, called Transocean a franchise company that is benefiting from higher rig rates.
Lee turned the panel's attention to former MF Global CEO Jon Corzine's testimony in Congress today. Ron Geffner, an attorney with Sadis and Goldberg, said Corzine was between a "hard place and worse place."
Geffner said his testimony was premature, adding that the better path would have been to have a full investigation by regulators before bringing in the "whole gang" for testimony. He said Corzine was careful in qualifying his comments on the "meaty" issues.
Lee moved to the "sin" sectors and Las Vegas Sands (LVS), which was down 5 percent after a downgrade. Jon Najarian said investors should use the drop to get into the stock through options. He liked the company's exposure to Singapore and Macao.
Shifting to cigarettes, Philip Morris (PM) is set to raise its prices next week. Bonnie Herzog, managing director for beverage, tobacco, and consumer research at Wells Fargo, said the price hike by Philip Morris and other cigarette companies is a positive move that is needed to offset declining volume.
She said her top pick was Reynolds American (RAI). She said Philip Morris is well positioned to grow in Asia, one of the pockets of growth in the world.
CNBC reporter Simon Hobbs reported a deal had been struck in Brussels by the principals on a new fiscal agreement. He didn't have any further details but wondered whether it was enough. Weiss doubted whether the approach of fines and sanctions against nations with budget defict problems could be a workable framework.
Lee noted that the VIX was up 7 percent today. Jon Najarian said he had expected a bigger pop in volatility and a bigger decline in stocks. He said the trading activity petered out after the fear index got above 30.
Shifting to the luxury retail space, Karen Finerman said there's been a lot of interest in Michael Kors' plans to raise $800 million in an IPO. Although it's been a tough year for IPOs, Michael Kors is a great brand and a good growth story, she said, adding she would look at the offering closely.
Lee brought in Dan Ives, an analyst with FBR Capital, to talk about cloud computing targets after IBM (IBM) announced the acquisition of DemandTec for $440 million. With the increased pressure on networks, his pick was Riverbed Technology (RVBD), a high-growth name, which he viewed as a M&A candidate.
Ives also looked favorably on Nuance Communications (NUAN), which declined today. He said Nuance still has the lion's share of the speech recognition business and is on Apple's (AAPL) iPhone train.
In the "Final Trades," Najarian liked the January calls in Kroger (KR). Mike Khouw liked the calls in Freeport-McMoRan (FCX). Weiss liked Verizon (VZ). Adami liked Home Depot (HD) and Finerman favored Polycom (PLCM). Terranova liked Consol Energy (CNX).
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