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Fast Money HomeFast Money Rapid RecapAbout Fast MoneyFast Money BiosFast Money Web ExtraFast Money Disclaimer
Text Size
Aug.25
5:51 PM ET
Monday, 25 Aug 2008
Dow Drops Over 200 Points
Posted By:Lee Brodie

DOW FALLS OVER 200 POINTS

The Dow [.DJIA  Loading...      ()   ] fell sharply on Monday as credit concerns hounded financial stocks while global growth worries hurt big technology and industrial companies.

The problem was that the market didn’t get any help in other areas, explains Pete Najarian. That’s why there was such a big down move.

There was just no catalyst to take the market higher on Monday, adds Joe Terranova. I asked myself, what will take the market higher going forward?

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AIG SHARES HIT 13-YEAR LOW

American International Group  [AIG  Loading...      ()   ], the world's biggest insurer, was among the top drags on the Dow, with its shares falling to a 13-year low. Credit Suisse cut the company's share price target and forecast a huge loss for the insurer.

"AIG's credit default swap portfolio inherently makes it one of the most exposed names to recent credit deterioration," Credit Suisse analyst Thomas Gallagher explains on Fast Money.

(Credit default swaps are essentially a type of insurance on complex financial contracts.)

Gallagher also cut his price target on the company to $22 a share from $30 a share to reflect, in part, "what we view to be a heightened risk profile owed to uncertainty regarding ratings."

“We think AIG is facing a hard decision," Gallagher adds. "Either they will have to do a large capital raise or see a huge downgrade of their debt. Or potentially both."

So what's the trade?

"We don’t think the time to buy is now,” he concludes.

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LEHMAN LEADS BANK SELLOFF

Shares of Lehman Brothers [LEH  Loading...      ()   ] dragged the sector lower after developments suggested South Korea’s Development Bank might be rethinking a decision to invest in the besieged investment bank.

I can’t imagine why an investor would buy Lehman, says Guy Adami. And quite frankly I don’t think there will be a takeover.

From the options action I see, says Jon Najarian, I’m not seeing investors betting Lehman will go higher. They’re merely betting on stabilization.

Among the few gainers on the day were home finance firms Fannie Mae [FNM  Loading...      ()   ] and Freddie Mac [FRE  Loading...      ()   ], which reversed large losses suffered last week on speculation a possible government bailout could wipe out shareholders.

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GOLDMAN BREAKING DOWN.

Technical analysis suggests that Goldman [GS  Loading...      ()   ] is breaking down. The stock crossed $160 to the downside.

The best of breed names need to start working before the market can move higher, says a frustrated Joe Terranova.

Ironically Goldman picked Morgan Stanley [MS  Loading...      ()   ] as the stock that could weather the crisis better than anyone else because of the mix in their portfolio, says Pete Najarian.

I like Morgan Stanley more than Goldman, adds brother Jon Najarian.

I’m long Goldman with AIG puts against it, reveals Joe Terranova.

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OPTIONS ACTION: SUNTRUST & WELLS FARGO

Jon Najarian is seeing unusual options action in SunTrust [STI  Loading...      ()   ] and Wells Fargo.[WFC  Loading...      ()   ]

Options action suggest that investors are making bets to the downside, but they’re small moves. Investors seem to think these stocks could drift lower through the first week in September but they’re both solid banks.

I’d look at USB [USB  Loading...      ()   ], adds Guy Adami. I think it’s a best of breed play.

-----------(for more trades scroll down)----------------------





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TROUBLING TECH TRADE

Technology shares also fell on Monday amid concerns about the global economy. Apple [AAPL  Loading...      ()   ]  was the top pull on the Nasdaq. Ninety-seven of the Nasdaq 100's stocks were in the red on the day.

The tech trade could be AMD [AMD  Loading...      ()   ]