Recap of February 8: War Sell-Off!

Brenda Buttner was joined by: Gary B. Smith, columnist; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of; and Brian Finnerty, senior vice president of Melhado, Flynn & Associates.
Trading Pit
The message is loud and clear: Wall Street does not want a war with Iraq, especially if the U.S. has to go it alone. 
The New Year kicked off with a real rally sending the Dow over 8,800.  But it has been downhill since, and the Dow is now at 7,864. 

War appears more and more likely, particularly after Colin Powell's address to the United Nations last Wednesday.  The question for the Bulls & Bears: Is the selling overdone?
Brian says we are indeed in the midst of a war sell-off.  He says buyers have walked away because of the uncertainty surrounding a possible war with Iraq, but he expects stocks to go up when the conflict in Iraq is resolved.

Tobin agrees with Brian that investors think this war is inevitable, and they do not want to be in stocks until it is resolved.  But, in addition to that, Tobin points out that the earnings outlook is cloudy and he says investors also need to think about what is going to happen after the war.  Who will run Iraq?  He is betting on stocks that provide income and doesn’t want to put fresh money in the market right now. 

Scott says both chart watchers and those who trade on a company's fundamentals are bearish, and when everybody is bearish, that is the time to look for good stocks to buy.  He says we are approaching maximum tension and once this tension is relieved, there will be a lot of confidence in the market and stock prices will rise.

Gary B. remains bearish.  He agrees with Brian and Tobin that the buyers have walked away. He also agrees that until we have a clear resolution, the market will drift down.  He says a chart of the S&P 500  indicates that we have broken below the support level and will probably return to October lows. He believes the Dow will fall to 7,200.

Stock X-Change

Tobin Smith always tells our viewers to “get their stock shopping list ready”.  So this week we had the Bulls & Bears do just that. Everyone named the stock at the top of their shopping list and the price at which  they would buy it.

At the top of Tobin’s list is Neurocrine Biosciences (NBIX).  He plans to buy when it hits $36.  (The stock closed at $39.19 on Friday.)  He says the company is developing a new product to help people sleep.   He says if the market continues to sell-off, Neurocrine could fall as far as $30, but when the market gets going next year he says it will be a $50 stock.  Gary B. and Brian don’t like the stock.  They question why he would buy at $36, if he thought it would hit $30.  Brian adds that you have time to buy this stock, and there’s no need to rush into it.  Scott says at $36, NBIX is a good buy.

Scott chose Johnson & Johnson (JNJ) at $47.  (J&J closed at $51.84 on Friday.)  He likes the company’s consumer products line as well as its pharmaceutical company.  He says the company is extremely well managed and has a diversified portfolio.  He likes the Friday news that Johnson & Johnson is looking to buy Scios (SCIO), a biotech company for about $2 billion.  Both Gary B. and Brian don’t like the stock.  They think if it does go down to $47, there isn’t going to be support there.  Gary B. says you could buy at $40.  Brian says sell at $47.

Number one on Brian’s wish list is Motorola (MOT) at $7.50.  (Motorola closed at $7.71 on Friday.)  He says the company made its last quarter by half a billion dollars and that all five of its businesses will be cash flow positive this year.  Gary B. agrees with Brian, but Tobin doesn’t like the stock.  He says MOT has way too much debt and is trying to sell a phone that people aren’t buying.

Gary B. likes American International Group (AIG) right now.  He says the stock will take off now that it has closed below $50.  (AIG’s closing price on Friday was $46.70.)  He explains that the stock dropped to the $50 level back in July and rebounded from there.  He says now that it is at that level, it is poised to rebound again and head to $65.  Tobin doesn’t like Gary B.’s stock.  He says AIG suffers from too many problems, and if it drops another bomb, it could be a $35 stock.  Brian also doesn’t like this stock.
Tobin, Scott and Brian all asked Gary B. to chart their favorite stocks.

Brian picked Oracle (ORCL) for Gary to chart. He owns Oracle.  Gary says he likes the fact that the chart has been in an up trend since May, but he is very concerned that it is at the bottom of that up trend, and if it breaks below $11.50 he thinks the stock will sink fast.

Scott “Junior Chartman” Bleier asked the Chartman to take a look at Solectron (SLR).  Gary thinks that the stock is poised for a breakout--he just doesn’t know if it will be up or down.  He says if the stock can close above $4 he’d buy it.  However, if it closed below $3 he’d short it.

Tobin asked Gary B. to chart TEPPCO (TPP).  Gary says the stock has been slowly heading down since November of last year.  However, he thinks it is ready to reverse that trend, and if it can close above $30 he’d be a buyer.


Gary B: When war begins we drop below October lows

Brian: Market rallies 10 percent when war starts; then drops again

Tobin: Fed cuts by 50 points; Dow up 500 points; sell bonds!

Scott: Alliant (ATK) bounces back after shuttle disaster