STOCKS ERASE LAST WEEK'S ADVANCE
The Dow slid on Monday on more evidence the year-long recession will keep eating into corporate profits, while retailers tumbled on worry the holiday shopping season could be the worst in nearly 40 years.
The auto sector was also a source of investor anxiety, cutting short the relief over last week's bailout deal.
Japan's Toyota Motor Co. said it would post an operating loss for the first time in 71 years, knocking its U.S. shares more than 5 percent lower, while investors worried whether Washington's rescue package for General Motors would leave its shareholders out in the cold. GM plunged more than 20 percent.
Concerns over the outlook for retailers mounted just days before Christmas as investors worried that cash-strapped consumers had kept a lid on shopping despite deep discounts over the last weekend before the holiday.
The weak outlook for consumer spending and the economy dragged dow crude oil prices , again, taking oil producer shares down.
With just six trading days remaining in the year, there is little hope the markets will avoid having their worst yearly performance since the 1930s. The S&P 500 is down about 40 percent for the year.
Strategy Session with the Fast Money Traders
Over the next few weeks I expect the market to be very quiet, speculates Dennis Gartman who’s in for Jeff Macke.
But look for opportunity if things sell off sharply or rally sharply, adds Karen Finerman.
It will take something really fundamental to change this environment from trading to investing, adds Tim Seymour.
Toyota’s action was atrocious, muses Guy Adami.
GM DRAGS DOW LOWER
General Motors equity may be largely if not entirely wiped out as it complies with the restructuring targets laid out in the federal auto bailout, an analyst at Credit Suisse said as he cut his price target to $1 and rating to "underperform."
"Over the next two months... it will become increasingly clear that the enormous sacrifice of value on the part of the union and bondholders will require the complete or near-complete elimination of the existing GM equity," analyst Christopher Ceraso wrote in a note titled "Game Over for Existing Equity."
You can trade it all you want, says Guy Adami. But I really think GM common stock is going to zero. Be careful.
What do you think. Tell us now!
OIL SLUMPS ALMOST 6%
Oil dropped to below $40 a barrel on Monday on signs the global economic malaise was slowing fuel demand further.
Oil consumption in China fell by 3.2 percent in November from a year ago, according to Reuters calculations, while crude imports into the world's No. 2 energy consumer dropped to the lowest level this year.
We are replete with oil, says Dennis Gartman. Demand is falling faster than they can cut production. Gasoline prices at the pump are down and consumers are still reducing the amount of gas they’re using. That’s incredible.
I think that’s because consumers are having a tough time, adds Karen Finerman. It creates a feeling of fear and retrenchment.
I expect demand to fall through the end of next year, adds Tim Seymour. It’s all about demand and not supply. But if you’re looking for a play, I like longPetrobras .
Every pension fund was racing into the commodities market, adds Gartman. And they’re just now having meetings to discuss getting out. I wouldn’t get long oil, he counters. Not yet.
Even markdowns of 60 percent to 70 percent could not entice shoppers to spend more in the final weekend before Christmas.
U.S. retailers are facing what could be the worst holiday shopping season in nearly four decades as a year-long recession, tighter credit and mounting job losses squeeze household budgets.
Retail stocks buckled on the news, Macy’s , Nordstrom and Kohl’s all closed lower Monday.
Some retailers tried to be aggressive early in the season with deep price cuts, explains Karen Finerman. It hurt their margins but maybe in the long run they played it well.
COMMERCIAL REAL ESTATE CALAMITY?
A group of trade associations representing the U.S. commercial real estate industry is lobbying to be included in the U.S. Federal Reserve's $200 billion asset-backed bailout plan in order to head off a wave of foreclosures over the next few years.
In a letter to U.S. Treasury Secretary Henry Paulson, industry organizations have asked that the $200 billion Term Asset-Backed Securities Loan Facility (TALF) provide guarantees or financing, or purchase highly rated asset-backed securities collateralized by new or recently originated mortgages.
The deterioration happens in slow motion, explains Karen Finerman. Because you don’t have all your tenants’ leases come up at the same time. And one of the reasons I wasn’t more short commercial real estate, personally, was because of federal intervention. However, I don’t think REITs are a sympathetic group.
For a trade I’d look at Acuity Brands , says Guy Adami. On a 4 million share day when it pops about 3% I’d get short.
These are getting to be crowded shorts, counters Tim Seymour. Be careful of Vornado and Simon Property Group . There’s a lot of money out there already shorting.
GLOBAL RECESSION FEARS BUILDING
China cut interest rates for the fifth time since mid-September as gloomy economic and corporate reports showed the world economy was stuck in a deep rut.
Japan reported its biggest-ever drop in exports in November while euro zone industrial new orders in October posted the deepest plunge on record, providing the latest evidence that demand was falling more quickly than governments can respond.
I think Asia will be the first back into the game, says Tim Seymour. Things aren’t as bad there as in the rest of the world. I think the trade is long dollar and short the FXE .
I’m not sure about getting long the dollar, says Gartman, but I would not be short.
AIG RESPONDS TO BONUS BACKLASH
Responding to criticism that AIG should not be paying bonuses this year, CEO Edward Liddy told CNBC bonuses and other perks were needed to retain top employees.
He said, "If you don't use retention bonuses those people, some of the best in the insurance industry, they will go elsewhere and we won't have any to sell or we won't get the kind of value we need...Keeping those people in place, both the units that are going to be sold and those we are going to retain, if we don't do that we will not be able to pay back the federal government."
You might not like it but you have to fairly compensate people to work at your company, says Guy Adami. It’s part of running a business.
And he’s saying we want to pay back the government but if the businesses are not in good shape, they probably won’t be able to sell them, adds Karen Finerman.
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Trader disclosure: On Dec. 22nd, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Seymour Owns (AAPL), (BAC), (F), (MER), (DXO); Seygem Asset Management Owns (FXI), (EEM); Finerman's Firm Owns (MSFT); Finerman's Firm Owns (OIH) Puts; Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM), (USO); CIBC Gartman Index Owns Soybeans, Gold, Natural Gas, Australian Dollar, Canadian Debt, Canadian Dollar; CIBC Gartman Index Is Short Crude Oil; CIBC Gartman Index Is Short Euro
CNBC.com with wires