Stocks tumbled to 5 year lows on Wednesday as investors grappled with an increasingly dire outlook for the global economy. Also a growing belief that ratings agencies such as Moody’s ignored warning signs in the mortgage securities market eroded investor confidence.
Also, a plunge in emerging market assets and widespread de-leveraging were seen as further signs the credit crisis that has plagued the United States and Europe has begun to hit developing countries. Stock markets around the world have fallen sharply over the last two days.
In another sign of a dismal outlook for global economic prospects the price of copper, a major industrial metal, dove to a three-year low.
How are you trading?
I’m seeing massive liquidations in Brazil, Russia and other emerging markets and I think that’s what took down our market, says Tim Seymour. Corporate debt markets around the world are a mess. If you’re looking for a trade I would get short the iShares MSCI Germany Index Fund
, Seymour says.
The day’s action seems overdone to me, says Karen Finerman. The idea of slowing global growth is not new.
I put on a shiny happy trade, says Jeff Macke. I bought McDonald’sand I lost money. I’m also long the dollar via the PowerShares DB US Dollar Index Bullish ETF and long the Ultra Short S&P 500 Fund ETF. Those trades did well
We’ve been trading between 8200 and 9500 in the Dow , adds Guy Adami. Play the extremes.
This is a bear market, adds strategic investor Dennis Gartman. Rallies are to be sold and weakness is not to be bought.
What do you think? Tell us now!
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GLOBAL RECESSION: COMMODITIES PLUNGEOil dropped more than 7 percent, on Wednesday, touching a new 16-month low as rising U.S. fuel inventories added to signs a global economic slowdown has dragged down demand.
Meanwhile, plummeting commodity prices sent energy and materials companies' shares sharply lower. Exxon Mobil was the top drag on the Dow, down almost 10 percent.
We overshot on the upside and I do believe we will overshoot on the downside, counsels Guy Adami. On a positive note, the railroads reported record earnings so there’s something good going on.
Eventually commodities prices will bottom too, adds Tim Seymor. Keep an eye on companies like Freeport McMoRan when they do.
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EARNINGS OUTLOOK BLEAK
Investors spent the day grappling with corporate earnings and profit forecasts that painted a dreary economic picture, at best. Most of the companies who reported earnings on Wednesday including Boeing and Wachovia disappointed investors with poor results.
At some point in time the volatility will end and once again the market will focus on underlying cash flow, says Karen Finerman. Ultimately that’s what determines what things are worth. That determines if a company can stay in the game. But in the short term the market is being controlled by fear.
That’s truly fundamental, adds Guy Adami. And it makes sense.
If you’re holding stock in a 401K and are thinking about cashing out, don’t do it, adds Finerman. I wouldn’t be surprised to see inflation in the near future and cash is not to be the place to be, at all. I’m riding out the crisis on both sides, by being both long and short.
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RATINGS OUTRAGE
Lawmakers spent much of the day trying to sort through the aftermath of the Wall Street crisis. Among the evidence they reviewed was this instant message exchange between two unidentified S and P officals about a mortgage backed security deal on 4/5/2007:
Official #1: Btw that deal is ridiculous.
Official #2: I know right...model def does not capture half the risk.
Official #1: We should not be rating it.
Official #2: We rate every deal. It could be structured by cows and we would rate it.
The ratings agencies are bringing down the entire globe, exclaims an irate Jeff Macke. Today’s testimony before Congress raises the suggestion that nothing out there is what it seems. And if you think this is just a Wall Street problem, you’re wrong.
It seems to me there’s more regulation on a slot machine in Vegas than there is on securities, adds Dylan Ratigan.
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Trader disclosure: On Oct.22, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money trader; Macke Owns (SDS), (UUP), (MSFT), (BNI), (MCD); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Finerman Owns (GS), (PM), (RAI), (DEO); Finerman's Firm Owns (MO), (MSFT); Finerman's Firm Is Short (BBT), (COF), (IYR), (IJR), (USO), (SPY), (IWM); Seymour Owns (AAPL), (BAC), (EEM), (F), (MER)
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