Trading An "Awful" Market

Monday, 14 Apr 2008 | 6:18 PM ET

Brace yourself for some big surprises this earnings season. Early first-quarter earnings are signaling an "awful" reporting period that is expected to send U.S. stocks lower in the weeks ahead, Goldman Sachs said in a research note on Monday.

"Although only a few firms have reported (first-quarter) results, early signs are awful," said the note, which was released by Goldman U.S. investment strategist David Kostin.

"We expect generally disappointing results and a swath of lowered profit guidance that will drive the S&P 500 lower in coming weeks."

What's more, Kostin's note said, first-quarter estimates remain overly optimistic, and negative earnings surprises are likely in the coming weeks.

How should you trade when you’re being warned to expect the unexpected?

Tomorrow's Trades: An "Awful" Market
The Fast Money traders help you get a head start on your trades.

Watch the volatility index, says Pete Najarian. It has been hovering around current levels for quite a while. If it breaks higher, watch out!

Stay with what’s working, counsels Guy Adami. I like the rails, he says. Why not look at CSX Corp , Burlington Northern or Union Pacific .

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Trader disclosure: On Apr. 14, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (YHOO), (INTC), (HAS) (MSFT); Najarian Owns (AAPL), (AMR), (CSCO), (TSO) (XLF), (YHOO); Najarian Owns (BHI) Calls, (BSC) Calls, (CHK) Calls, (LEH) Puts; Najarian Owns (MSFT) Calls; Finerman Owns (GS); Finerman's Firm Owns (MSFT), (SUN), (TSO), (VLO), (WMT), (YHOO), (GLNG), (CROX); Finerman's Firm Is Short (IYR), (IJR), (SPY), (MDY), (IWM), (COF) (GLD); Finerman's Firm Is Short (FNM) Calls; Finerman's Firm Is Short The British Pound; Finerman's Firm And Finerman Own (KALU); GE Is The Parent Company Of CNBC; NBC Universal Is The Parent Company Of CNBC

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