Fast Money traders on Wednesday had their eyes squarely on market buzz that suggests serious challenges may lie ahead for stocks.
Specifically, three major trends caught the attention of traders as they tried to determine whether the Street was starting to receive early signs of a pullback.
Here’s what our pros are looking at:
Development #1: Juniper wipes $3 billion in value after network company warns of weak sales.
Juniper said it is being hurt on three fronts: businesses are slowing spending, U.S. government agencies are cutting budgets, and Japan is still dealing with the aftermath of the March earthquake and tsunami.
And street analysts didn’t hesitate to downgrade it. Please take a look:
Firm Previous Rating New Rating MKM Partners Buy Neutral Citigroup Buyhold JP Morgan Overweight Neutral Piper Jaffray Overweight Neutral Oppenheimer Perform Out Perform Goldman Removes ‘Conviction Buy’ Think Equity Buy Hold William Blair Out Perform Market Perform Avian Positive Neutral
Analysis: Trader Brian Kelly is very concerned that Juniper’s results indicate that corporate spending is starting to slow significantly. “Corporate spending was the mainstay of the economy, and it supported the economy. But it’s becoming invisible.” Kelly thinks that’s important. From there, “we can now draw conclusions about the economy.”
Trader Steve Cortez added that networking companies like Juniper and Cisco rely on government revenue and are currently struggling due to austerity, especially at the state and local level. “I think there’s an additional downside,” he says.
Trader Zac Karabel warns investors against thinking of government austerity as an either-or event. In other words, it is not negative for any company. “IBM expects to see an increase in business from governments because (austerity) requires governments to be more efficient.”
Development #2: S&P further downgrades Greece’s credit rating.
The rating agency says Greece is likely to need another major debt restructuring within the next two years. The debt-ridden country is the lowest-rated country in the world by S&P, which downgraded its rating by eight notches on June 13.
Analysis: Trader Steve Cortes is closely monitoring the euro and the movements of Spanish and Italian bank stocks. “If you look at Santander, BBVA, UniCredit, they are being killed. They have completely abandoned the Second Greek Relief Assembly.”
Cortés called these developments “incredibly important” and should remind investors that Europe’s fiscal crisis is far from over.
Trader Stephen Weiss agrees, believing that once the U.S. debt ceiling hike is over, market professionals will turn their focus back to the slowing economies of Europe and the United States. In fact, he thinks it’s already starting to happen. He points out weaknesses in Caterpillar, Deere, and UPS to support his theory. “I have to be careful.”
Development #3: Corning warns that manufacturers like Sony and Samsung are revising their TV sales forecasts downward, and has revised its forecasts downward.
“There’s a sense that economies around the world are not growing as fast as people originally expected,” Corning CEO Jim Froese said. 3M also amplified this result by warning of lower TV prices earlier in the week.
Analysis: Trader Steve Cortez sees this development as another sign of weakness in the labor market. “If you look at PAYX, it’s hitting new lows from 2011. It’s a scary chart. It shows the labor market is not improving.”
Trader Brian Kelly believes this development is a reason to take a short position in electronics retailer Best Buy.
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dunkin donuts
On a positive note, Dunkin Donuts stock soared Tuesday after setting a price of $19 per share Tuesday night.
Should you play this stock?
Trader Zach Karabel says he doesn’t plan to jump into the stock at current prices. “I’m not too excited about this company. I don’t want to bet on strong middle class consumption.”
Trader Steve Cortez is on the complete opposite side. “I love Dunkin’ Coffee, and I think it’s an affordable luxury. I’m a buyer,” he says.
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oil trade
Spot crude oil prices fell on Wednesday after new data showed rising U.S. inventories.
What’s the deal now?
Just ask Dan Dicker, president of Merckbrock and author of Oil’s Endless Bid. Watch the video now!
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Trader Disclosure: The following stocks and products mentioned or to be mentioned on CNBC’s “Fast Money” on July 27, 2011 were owned by “Fast Money” traders. Mr. Cortez owns U.S. bonds. Short Cortez (LVS). Cortes is short (LULU). Cortez is short (IYT). Cortes is short on euros. Cortes is a short copper. Cortes is a short corn. Caravelle owns (DOW). Caravelle owns (GOOG). Caravelle owns (SBUX). Owned by Weiss (COP). Owned by Weiss (DVN). Weiss owns (AKAM). Owned by Weiss (SLV). Owned by Weiss (UGL). Weiss owns (CAT). Weiss owns (QCOM). Owned by Weiss (TWM). Owned by Weiss (BTU)
brian kelly
Accounts managed by Brian Kelly Capital Own (TLT) calls
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The case of Zach Carabelle
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