4-DAY WINNING STREAK SNAPPED
The Dow and S&P 500tumbled on Wednesday, halting a four-day winning streak, largely due to falling oil prices and rekindled worries about the economy.
New reports showed the vast service sector contracted for the 8th straight month in May and employers axed 532,000 private-sector jobs.
Also, Federal Reserve Chairman Ben Bernanke raised concerns about inflation, warning that it was time to rein in deficits.
On top of that oil prices toppled on Wednesday, dragged down by an unexpected build in U.S. crude stockpiles.
Does the data signal the rally is on hold?
I think the market goes lower from here, muses Guy Adami. I need to see the S&P stay above its 200-day moving average for about a week before I can feel bullish.
I concur, says Steve Grasso. But I think the S&P trades in a range between 875 and 950.
We may be a little overbought, muses Pete Najarian.
Nothing has changed, counters Tim Seymour. In fact we are above the 200-day moving average. As far as I'm concerned investors are still underweight equities.
ENERGY STOCKS LEAD MARKET DROP
As we told you above, oil prices toppled on Wednesday, dragged down by an unexpected build in U.S. crude stockpiles. According to the U.S. Energy Information Administration total U.S. petroleum inventories rose by 15 million barrels during the week, the biggest gain since October.
Also the stronger dollar dragged down oil. Pressure came as the dollar recovered from a 2009 low against the euro after monetary sources in Asia said they would keep buying U.S. Treasuries even if the U.S. credit rating were cut.
What do you need to know about commodities?
If you want to sleep at night you have to trade in and out commodities, counsels Steve Grasso. You can’t stay in them for weeks at a time.
Except for the past two weeks the trend in the oil numbers have been bearish, explains Tim Seymour. We were expecting a draw of 2.9 million barrels and we had a build of 1.5. That's not very good for a market that's been rallying hard.
It doesn't suprise me that oil is selling off, adds Guy Adami. I think oil could go to $60 and it could take the S&P with it.
I have my eye on Western Refining , reveals Pete Najarian. The volume of calls traded on Wednesday looks bullish for this stock.
I’m positioning myself to be short oil and nat gas , reveals hedge fund energy trader Bill Perkins. I’m especially bearish on nat gas, it’s in danger of overflowing storage. And I also think nat gas drags down coal.
FAST FX: GREENBACK COMEBACK
On Wednesday the dollar rebounded from its lowest levels this year against the euro after Asian monetary sources said they would keep buying U.S. Treasuries even if the U.S. credit rating were to be downgraded.
The remarks by sources from China, Japan, India and South Korea, were compiled by Reuters rather than being a joint statement, helped to stem recent selling that has driven the dollar's trade-weighted index .DXY to its lowest this year and down more than 7 percent since the start of May.
It seems to me the British Pound is the ‘tell” currency, explains Tim Seymour. When the pound is strengthening and dollar is weakening it’s a good time to be buying risk.
BANKS DOWN AGAIN
The financial services sector finished lower again on Wednesday as secondary stock offerings and TARP repayment plans weighed on the sector.
I think the short is still on JPMorgan , says Guy Adami. I think it goes down.
However, volatility in JPMorgan, Morgan Stanley and Goldman is still low, adds Pete Najarian. I’m not that nervous about this space.
The next catalyst in this market will probably be TARP, muses Steve Grasso. It seems to me that whenever the banks talk about repaying it stocks go higher and when the government talks about it, stocks sell off.
TOPPING THE TAPE: APPLE
Apple finished the day in the green despite a negative day for the technology sector . Positive sentiment was generated by an upgrade from Collins Stewart, which raised Apple to buy from hold and increased its price target to $170.
At $140 it’s probably a little late to get into this stock, says Guy Adami, even ahead of the world wide developers conference.
I have yet to see any reason to chase any stock in this market, adds Pete Najarian. I think the stock falls to $125 and that’s your entry point.
However, If you want a quick trade you can probably still own Palm for the next day ahead of the Pre’s introduction, counsels Adami.
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Trader disclosure: On June 3rd, 2009, 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), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Seymour Owns (TTM), (AAPL), (BAC), (BBY), (FCX), (EEM), (PBR), (NOK), (MGM); Seymour Is Short (VALE); Seymour's Firm Is Short (VALE); Grasso Owns (V), (AMZN), (WMT), (RIMM); Grasso's Clients Own (ARO), (V), (OXY), (PBR), (WMT), (RIMM), (ARO); Najarian Owns (CELG); Najarian Owns (AMAT) Calls; Najarian Owns (BX) Calls; Najarian Owns (FCX) Call Spread; Najarian Owns (INTC) Call Spread; Najarian Owns (MOS); Najarian Owns (WNR) Calls; Najarian Owns (XHB) Call Spread
For Bill Perkins:
Small Ventures USA Has A Short Position In Natual Gas Futures And Options
Small Ventures USA Has A Short Position In Crude Oil Futures And Options
CNBC.com with wires