S&P 500 HITS LOWEST SINCE SEPT. 1996
Stocks slid on Thursday with the Dow and S&P falling to 12-year lows and the Nasdaq finishing at its lowest level since March 2003, a month remembered for the beginning of the Iraq war.
A stream of negative news caused sentiment to plunge starting with General Motors which warned of possible bankruptcy. Investors worry that GM's collapse would send shock waves through the economy, given that it is a major employer and buyer of supplies from auto parts makers.
Also concerns about the banking system's fate reinforced investors' reluctance to take on risk. Shares of Citigroup , once the world's largest bank by market value, fell as low as 97 cents during the session, trading below $1 for the first time. Anxiety rose over whether the bank can be restored to health or whether it will have to be taken over by the government.
On a relatively bright note, shares of GE stabilized more or less after the firm's CFO Keith Sherin told CNBC that the finance unit has no short-term liquidity issues, and speculation about its ability to maintain sufficient capital is "overdone." He also said there was there was no "time bomb" hidden in its hefty finance arm.
Strategy Session with the Fast Money Traders
I think the market is telling GE something, says Karen Finerman. They need to increase their credibility. The market doesn’t seem to believe everything they’re saying.
I think GE needs to share more of the metrics of their business with the Street, says Jeff Macke.
I believe there are healthy financials out there, says Guy Adami. I think USB is one of them. But it seems the market thinks all banks are guilty by association.
I also think we need to get rid of the ratings agencies, adds Macke. Now they’re doing more harm than good. (Investors are concerned about a debt rating downgrade for GE and that’s likely dragging down this stock.)
Dylan Ratigan is outraged by the behavior of the financial institutions in general. Wall Street needs to eat some of its own, to save themselves. And if they don't eat one of their own, the people of America will eat all of them. It's time to acknowledge that a few people acted in a terrible way. The pull of capital out of the system by AIG insuring without collateral should be criminal.
The silver lining in the day was that some good banks are starting to differentiate themselves from the bad ones, says Pete Najarian. Now that Legg Mason has taken more write-downs it’s starting to look attractive.
GM SLIDES ON BANKRUPTCY WARNING
GM shares tumbled on Thursday after the firm said its auditors had raised "substantial doubt" about its ability to survive outside bankruptcy if it fails to stem its losses and stop burning cash.
The "going concern" warning from the struggling U.S. automaker had been expected, but underscored the stakes for GM as it seeks up to $30 billion in U.S. government aid to restructure outside a court-supervised bankruptcy process.
Now that bankruptcy is officially on the table we’re at the end of the beginning, says Jeff Macke. I think GM needs to go into bankruptcy so it can emerge and begin doing business better.
GLOBAL RECESSION: OIL BELOW $44
Crude futures ended almost 4 percent lower on Thursday on fresh concerns about demand in a slowing economy. The move follows yesterday’s nearly 9 percent rally.
Exxon broke lower on Thursday, reveals Pete Najarian. I’d be careful.
I think crude probably trades back down, muses Guy Adami. In the space I like ConocoPhillips better than Exxon Mobil .
And keep an eye on copper, counsels Adami. Inventories are coming down which should be good for the copper companies.
There seems to be just enough demand for copper to hold prices just above 150, adds Najarian.
CREDIT TURMOIL IS BACK
It seems financial market turmoil is back with a vengeance. Commercials mortgage backed spreads, which some consider to be a tell-tale indicator of this crisis, are growing considerably wider.
The perceived risk of problems in commercial lending is going up, says Dylan Ratigan.
This is the spread between what the credit is rated at, and what it’s being priced at, by the market, explains Jeff Macke.
In other words, perceived risk for anybody who lent money to real estate is exploding, adds Karen Finerman.
For more trades including trades for Joe Terranova turn the page
TRADING THE TURMOIL
In this market it’s tough to tell if anything is forming a trend. However FM contributor Joe Terranova has a thesis.
I believe there is a very large recovery rally coming in the near term, says Terranova. Historically markets bottom-out in October and March.
So what I’m doing right now is looking for quality companies such as Exxon Mobil and getting long.
I’ve also purchased shares of Broadcom , Dell , Intel and Joy Global.
FAST FLASH: Berkshire Hathaway Hits a 5 ½ Year Low
Warren Buffett’s Berkshire Hathaway is certainly not immune to credit crisis. Shares of the firm hit a 5 ½ yr. low on Wednesday.
It feels like the market is after him, muses Guy Adami. The other traders agree.
FAST FLASH: Microsoft Falls To Levels Not Seen Since June 1997
Microsoft could go lower still, counsels Karen Finerman.
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Trader disclosure: On Mar. 5th, 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); Macke Owns (GE) Puts; Macke Owns (MS), (SDS), (AAPL), (MOS); Najarian Owns (GDX), Najarian Owns (MS) & (MS) Calls, Najarian Owns (MSFT) & (MSFT) Call; Najarian Owns (X) Call Spread; Najarian Owns (V) & (V) Calls; Najarian Owns (WFC) & (WFC) Calls; Najarian Owns (DNA) Calls; Najarian Owns (DOW) Call Spread; Najarian Owns (FCX) Spread; Najarian Owns (GLD) Put Spread; Najarian Owns (GE) Puts; Najarian Owns (PNC) Put Spread; Finerman's Firm Owns (DNA) & (DNA) Calls; Finerman's Firm Owns (BAC) Preferred; Finerman's Firm Owns (WFC) Preferred; Finerman Owns (WFC) Preferred; Finerman's Firm Owns (PLCE), (MSFT), (PBR), (RIG), (TGT): Finerman's Firm Is Short (BAC), (BBT), (IYR), (IJR), (IWM), (MDY), (SPY), (USO)
Terranova Owns MACI Oil Futures; Terranova Owns (COP) Calls; Terranova Owns (XOM), (BRCM), (FCX), (INTC), (DELL)
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