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Stocks Drop 3% - Biggest Loss In 3 Months

STOCKS DROP 3%....BIGGEST LOSS IN 3 MONTHS

Investors sent the Dow and the overall stock market sharply lower on Thursday amid signs that the economic slowdown is showing no sign of improvement.

It was the biggest one-day percentage drop for the three major indexes since June 26, explains Melissa Lee who’s in for Dylan Ratigan. It was also the fourth day of losses for both the Nasdaq and the S&P 500, and the S&P 500's longest losing streak since January.

The day’s action felt like another fund was getting out of its positions, says Guy Adami.

What do you think? Tell us now!











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MARKET'S WORST PERFORMER: FINANCIALS

Financial stocks were hammered, after Bill Gross, the manager of the world's biggest bond fund, Pimco, said that to halt what he called "a financial tsunami" the U.S. government should give the Treasury the right to buy debt and other assets.

Gross told CNBC that his firm's clients and contacts around the world were "sitting on their hands as well," waiting for a major buyer to come into the asset markets.

This suggests to me that things aren’t so good, Guy Adami injects.

Also shares of Lehman Brothers dropped after the firm revealed its LibertyView hedge fund lost money in July. Also speculation grew that the Koreans were backing away any kind of deal with Lehman.

Even with the day’s big move, I don’t think we’ve seen an end to the pain in financials, says Karen Finerman. Remember the last time Lehman marked their books things were materially better in the financials than they are now.

Keep an eye on the Financial Select Sector SPDR , counsels Pete Najarian. It made an 8% move in 4 trading days. If it pulls back it could be a buy.

The financials are made up of smoke, mirror and pixie dust and that’s a hard market to get confident about, exclaims Jeff Macke.

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OIL DOWN 9% IN THE LAST 5 DAYS

Oil prices closed at their lowest level in five months Thursday as a lower-than-expected drop in U.S. gasoline supplies gave traders more reason to believe that a cooling economy is forcing Americans to drive less.

Speculators are going to overshoot crude on the downside the way they overshot it on the upside, says Guy Adami. It feels to me like a weird day is coming in the next 3 or 4 trading sessions.

As commodities pull back keep your eye on the railroads, counsels Pete Najarian. Burlington Northern and CSX seem like they’re infront of themselves but could soon get to a level where you’d want to own them.


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RETAIL SALES DISAPPOINT

Generally lackluster August retail sales were another headwind for the market with Nordstrom , The Limited, and Saks same-store sales for August all worse than expected. Wal-Mart was able to buck that trend with sales that doubled estimates but still closed lower.

The market is a cruel mistress, exclaims Jeff Macke, but I continue to like Wal-Mart .

I think investors should buyTarget and start paring back their position in Wal-Mart, counsels Guy Adami.

I would short Target and stay long Wal-Mart, Jeff Macke exclaims. Adami’s got it backwards.

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DEFENSE, DEFENSE: STICK WITH STAPLES?

Despite the brutal sell-off on Thursday consumer staples such as Clorox and Coca Cola finished higher.

Call buying in Clorox suggests to Pete Najarian investors are taking a close look at this stock with expectations it could go higher.

I like Coca-Cola, adds Jeff Macke.

My trade is Church & Dwight, says Guy Adami or long McDonald's around $60.


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HIDE OUT IN HEALTH CARE?

Typically, the healthcare sector resists economic cycles. Johnson & Johnson , Genentech , and Amgen are all up double digits in the past 6 months.

Both Guy Adami and Karen Finerman are bullish on Johnson & Johnson.








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Trader disclosure: On Sept 4, 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 (WMT), (UUP), (ATVI), (MSFT), (CY), (EMC): Adami Owns (C), (GS), (INTC), (AGU), (BTU), (MSFT), (NUE): Finerman Owns (GS): Finerman's Firm Owns (AAPL) Call: Finerman's Firm Owns (AEO), (MSFT), (NOK), (SUN), (TSO), (VLO), (JCP), (JNJ), (RIG), (PDE); Finerman's Firm And Finerman Own (C) Leaps; Finerman's Firm Is Short (BAC), (XLF), (IYR), (IJR), (MDY), (SPY), (IWM), (COF), (WFC), (BBT), (WB); Finerman's Firm Owns (JCG) Calls. (IRF) Calls: Pete Najarian Owns (AAPL) And (AAPL) Collar; Pete Najarian Owns (LEH) Call Spread, (LEH) Put Spread; Pete Najarian Owns (LMT) Put Spread; Pete Najarian Owns (MS) And Is Short (MS) Calls; Pete Najarian Owns (NOK) And Is Short (NOK) Calls; Pete Najarian Owns (XLF) And (XLF) Collar

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