GM DRAGS DOWN DOW
The Dow fell on Thursday as a sharp drop in oil prices sent the energy sector tumbling and disappointing profit outlooks from large companies such as Merck raised the specter of a worsening economy.
General Motors was among the top drags on the Dow after the car company said it would be open to a merger with Chrysler if the U.S. government mandated it as a condition for providing the emergency financing.
Also weighing on sentiment was a fresh round of job cuts from companies, including Dow component AT&T , which is chopping 12,000 jobs, and media company Viacom , which is planning to trim 850 employees.
Meanwhile, the European Central Bank made its biggest ever cut to interest rates on Thursday, lowering benchmark credit costs by 75 basis points as it forecast a gloomy year for the recession-bound euro zone economy.
A rare positive note was sounded by home builders, whose shares jumped after Freddie Mac reported on Thursday that the average U.S. 30-year fixed mortgage rate scored the biggest weekly percentage drop in 27 years.
Strategy Session with the Fast Money Traders
GM began to slide when the idea of bankruptcy was put on the table, says Jeff Macke. The auto industry is terrible.
And we learned that Europe was not an anchor of stability, adds Tim Seymour. I think the rate cuts are alarming. They’re saying things are worse than expected.
That’s why the dollar is still in play, adds Guy Adami. But I think Friday will be a critical day in the market. I expect it to break out, one way or another.
I find that this market is irrational, exclaims Pete Najarian. And I've got my eye on commodities which did not rally on Thursday. I find it hard to think the market could rally without them.
And the dollar weakened, adds Seymour. That should have greased the wheels for commodities but didn't.
It’s redemptions that are driving commodities lower, adds Najarian. But in ’09 that could well change.
If commodities run, Gold might not go along for the ride, adds Adami. The open interest suggests that run is done.
The time to get into gold was the middle ages, bristles Jeff Macke. But you know what’s next... De-flation. It’s a worry.
I don’t think we’re in an deflationary environment, counters Tim Seymour. I see the reflation trade already underway.
2009 OUTLOOKS LOOK GRIM
The near-term U.S. economic outlook is "not encouraging with employment expected to weaken further," Atlanta Fed President Dennis Lockhart said in a speech to an energy conference in New Orleans. "House prices likely will continue to fall, with a further erosion of household wealth.
Meanwhile, AT&T said on Thursday it’s slashing 4% of its workforce, Merck forecasted ’09 earnings below forecasts and DuPont warned of a Q4 loss.
I’d keep an eye on DuPont, says Guy Adami. On a lousy tape the stock was up small. I wouldn’t rush in but I think it’s a “tell.”
If you’re looking for a trade right now, look at the ProShares Ultra Financials, counsels Pete Najarian. If the financials turn it should give you a good bank for your buck.
OIL PLUNGES BELOW $44
Oil fell more than 6 percent on Thursday to its lowest level in nearly four years in response to further bleak economic data that could spell a deeper decline in global energy demand.
Oil prices have dropped more than $100 a barrel from record highs over $147 in July, as the global credit crunch has eaten into demand in large consumer nations.
I’d keep an eye on ConocoPhilips , says Pete Najarian because you get exposure to refiners, nat gas and oil. If we start to see a turnaround it should participate to the upside. But I don’t like the space right now.
The price at the pump has been slashed in half and yet people are driving less, adds Jeff Macke. That’s deflation!
If you’re looking for a commodities play, I like Freeport McMoran and Vale, adds Tim Seymour.
Or take a look at Nucor , adds Pete Najarian. It was up on Thursday.
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Trader disclosure: On Dec. 4th, 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 (MSFT), (WMT), (UUP), (MCD); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Najarian Owns (FCX); Najarian Owns (NUE) And Is Short (NUE) Calls; Najarian Owns (CIT) Calls; Najarian Owns (SBUX) Call; Seymour Owns (AAPL), (BAC), (BX), (F), (MER); Seygem Asset Management Owns (RIO)
GE Is The Parent Company Of CNBC
CNBC.com with wires