Dow Dives 300 Points To Below 7,000

DOW DIVES 300 POINTS TO BELOW 7,000

Deep concerns about the health of financials pushed the Dow Jones industrial average to another bear market low; its first drop below 7,000 in more than 11 years.

The point drop is hardly the worst we’ve seen, but the tumble itself wreaks havoc with the psyche of the Street. At current levels, the market has erased more than half of the average's value since it hit a record high of over 14,000 in October 2007.

The catalyst that sent the market plunging came from AIG which posted a record $61.7 billion quarterly loss on Monday and received more bailout money after officials concluded again that letting the insurer fail would threaten the world financial system.

And it's not just U.S. companies that have Wall Street frightened. HSBC , Europe's largest bank by market value, said Monday it needs to raise $17.7 billion. The company reported a 70 percent drop in 2008 earnings and said it would cut 6,100 jobs.

While the root of financial firms' problems lie with the bad bets they made on mortgages and mortgage-backed securities, now the recession is exacerbating their problems as it also forces millions of job cuts.

Last week the Dow and the S&P 500 index fell below their Nov. 20-21 lows, reached at the height of the credit crisis. Many traders had hoped would mark the market's low.

Strategy Session with the Fast Money Traders

It’s history unfolding before our eyes, says Dylan Ratigan. AIG is essentially insuring $500 billion in credit but basically keeping nothing in collateral.

My emotional instinct is to be a buyer of stocks in the morning, says Joe Terranova. I’m hoping that all the pessimism is coming to a crescendo.

The market is trading on a lot of things other than fundamentals right now, muses Zach Karabell. If you look at the data, the rate of the real deterioration in the economy could be slowing.

For investors, it’s about staying alive for another day, counters Tim Seymour. I agree that fundamentals are interesting, but don’t be the first to dive in this pool.

I’d shorten up my swing and have a lot of cash in my portfolio, bristles Jeff Macke. Fundamentals in banks are deteriorating and that’s why the market is going lower. There are no super cheap stocks because we don’t know what the government is going to do.

I see a lot of cash on the sidelines, counters Joe Terranova. That will drive the market, at some point. We could see a vicious bear market rally.

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OIL TUMBLES 10%

Oil prices dropped 10 percent to $40 a barrel on Monday as a deteriorating world economy threatened to cut further into fuel consumption, outweighing OPEC's strong compliance with supply curbs.

The deepening of the 14-month economic slump was underscored by a report showing spending on construction projects slumped to its lowest level in over fours years in January.

I would not be short oil, counsels Joe Terranova. Long term I think it climbs.

Economic data out of China this week should show two months of increased demand, counsels Tim Seymour. And they’re a buyer of commodities.

If you’re looking for signs of change, look to consumers, says Zach Karabell. Most people aren’t going to lose their jobs. When they’re no longer afraid and start spending again it should drive the economy.

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TOPPING THE TAPE: THE DOLLAR

The dollar rose against most other currencies on Monday as the broad market sell-off triggered a flight to safety.

I think there are major troubles in Europe and Asia, explains Tim Seymour. As a result the dollar should get stronger from here.

This is bad for multi-nationals such as Hewlett Packard , McDonalds and Pepsi which do big business overseas, adds Jeff Macke. As they repatriate profits they bring in less dollars.

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Trader disclosure: On Mar. 2nd, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (AAPL), (EEM), (BAC), (FXI); Seymour's Firm Owns (FCX); Terranova Owns (DIS), (FXC), (XBI), (BRCM), (WYNN), (INTC), (DELL), (JOYG); Terranova Owns (AMGN) & (AMGN) Puts; Terranova Owns (IBM) Call Spread; Terranova Owns (COP) Calls; Terranova Owns MACI Oil Futures; Macke Owns (MS), (GS), (SDS), (TM), (AAPL), (WOS); Karabell Owns (AAPL), (FCX), (GOOG), (GLD), (GE), (JPM)

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