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Dow Drops Into Bear Embrace

DOW DROPS INTO BEAR EMBRACE

Stocks tumbled Wednesday with the Dow Jones Industrial Averageclosing in bear market territory. The two biggest drags were oil prices and a warning from Merrill that the bankruptcy of General Motors is "not impossible."

The Fast Money traders have wide ranging views on what influenced the market Wednesday.

I think the market move is about the weak economy, says Tim Seymour. I don’t think traders really care about the actual numbers in the Dow

Anyone who had anything on their books got out because they’re afraid Thursday could be messy ahead of the holiday, adds Guy Adami.

The late end of day spike in oil is what really dragged down the stock market, says Pete Najarian.

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IS GLOBAL GROWTH STORY DEAD?

Raw materials and industrial stocks were slammed by traders Wednesday after concerns surfaced over slowing global growth. The fear is that higher interest rates and a weak consumer could finally tip the globe into recession.

I heard speculation that BHP and RioTinto were pushing up coal prices in anticipation of their renegotiation of price, says Karen Finerman. After that was done coal took a licking. And I don’t think it stops there, she adds, I think the rotation has started.

These are crowded trades, adds Tim Seymour. It could well be profit taking. And if you think the global growth story is ending then also look at ag names including Potash, Syngenta, Mosaic and Agrium . I think their charts look terrible.


But it's not all doom and gloom. The trade also have some "Buy" recommendations.

One name I do like is Empresas ICA , adds Tim.

Or look at Caterpillar , adds Guy. I like the stock long-term but that doesn’t mean it can’t continue to go down.

If you want to play the space make sure to include protection with put buying, counsels Pete Najarian.

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IS GM GOING BANKRUPT?

General Motors could need to raise as much as $15 billion in cash to shore up liquidity and bankruptcy is "not impossible" if the U.S. auto market continues to slump, Merrill Lynch said on Wednesday.

Although other analysts have suggested GM needs to raise funds to ride out the downturn in the U.S. auto market through 2009, Merrill's estimate of GM's financing needs was the highest yet. It also carried the most stark warning of the bankruptcy risk for the largest U.S. automaker.

I don’t think GM will go bankrupt, says Guy Adami. Personally, I think it sets up for a long-side move.

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NASDAQ FALLS INTO BEAR MARKET

The Nasdaq dropped 2% Wednesday bringing the decline from its October high past 20%, the criteria for a bear market. Googleand Microsoft led the day’s drop.

There’s real pressure in tech right now, says Pete Najarian. Investors are taking profits. It’s all part of the rotation. If you’re looking for a tech trade look at SanDisk , he says. Option action suggests it could go higher.

Meanwhile insiders including Michael Dell are buying shares of Dell , explains Guy Adami. You can play it for a pop but I can’t get bullish until it breaks $24.

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BREAKING NEWS: NVIDIA

Graphics chipmaker Nvidia on Wednesday warned revenues and gross margin would miss analysts' estimates due to weak demand, sending its shares down 20 percent after hours. They also cited delayed production of a new product and price cuts on some other chips due to a price war.

They had a $125 million dollar miss on the revenue line, explains Karen Finerman. Don’t step infront of that.

I think it could be a takeover target, adds Pete Najarian.

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GO FIGURE: LEHMAN HIGHER

Lehman shares jumped again. Earlier in the week Morgan Stanley recommended Lehman as a buy setting a price target of $31. Meanwhile Oppenheimer analyst Meredith Whitney slashed her estimates for Merrill Lynch based on an increase in write-downs, saying she now expects the investment bank to lose money in the second quarter and for the full year.

Meredith has been dead on, says Karen Finerman, but I also think it’s bullish for Merrill that it wasn’t down more on the news.

And don’t run into Lehman on the upgrade, adds Guy Adami.

Until we start to see strength in Fannie and Freddie I don’t think we’ll see strength in any of the financials, says Pete Najarian.


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MYSTERIOUS OIL SPIKE.

Oil prices shot to a record high over $144 a barrel on Wednesday after a drop in U.S. crude inventories stoked supply concerns. Although the inventory data was released mid-morning oil spiked mysteriously late afternoon. What was behind the mysterious move and should you expect more gains tomorrow?

I think investors waited until the last 5 minutes of the day to get out of short positions, explains Joe Terranova, chief alternatives strategist for Phoenix Investment Partners and Fast Money regular. It was a real short squeeze.

And as the dollar dropped investors started playing oil on the long side, adds Tim Seymour.

If you’re looking for a play look at the integrateds. Sooner or later oil will get knocked down and investors who want to stay in the energy space will go into integrated. Personally I’m long Suncor .

Or look at Exxon , adds Guy Adami.


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