DOW DOWN ALMOST 300 PTS IN TWO DAYS
The bears seized control of trading on Tuesday sending the Dow sharply lower as mixed economic data and disappointing sales from Best Buysparked worries about a recovery.
"It indicates that at a minimum, the market's taking a breather and may be starting a meaningful correction," says Hugh Johnson, chief investment officer of Johnson Illington Advisors.
"The worry is we've gone too far too fast and that we've overstated the strength of a recovery in the economy and earnings."
The Fast Money traders say the economy needs to start showing real improvement to support optimism about a budding recovery.
How should you be positioned?
Strategy Session with the Fast Money Traders
Big investors were buying the August 50 calls on the Vix, reveals Pete Najarian. That suggests they are growing worried there’s another shoe out there – and it’s about to drop.
It seems to me the equity markets are in retreat mode, adds Joe Terranova. I think the critical level in the S&P right now is 905. If we close below that level the market could really tumble.
I don't expect to see a strong rally until we get earnings and that’s still not for a few weeks, adds Tim Seymour. The bulls will need solid earnings to support the next move higher.
NEW WALL STREET REGULATION OUT WEDNESDAY
On Wednesday President Obama is expected to formally unveil a set of proposals to more tightly regulate the wheeling and dealing on Wall Street.
One key element in the administration's plan will be the creation of an independent Consumer Financial Protection Agency that will write and enforce rules on fair lending.
Also, to prevent future crises, the administration wants to give the Federal Reserve new powers to police "systemic risk" in the economy, in conjunction with a council of regulators.
In addition, they will also propose empowering the government to seize and unwind large, troubled companies; boosting bank capital and liquidity standards; and reining in markets for securitized debt and over-the-counter derivatives.
Months of debate lie ahead. Congress has set more than a dozen hearings on financial reform between now and mid-July.
What’s the trade?
I’m not terribly concerned about the policies about to be put forth, says Joe Terranova. But I am concerned that the move could create a double dip recession.
WORST PERFORMER: COMMODITY STOCKS
Commodity and resource stocks were among the Tuesday’s biggest losers. Although they gave the market a boost early in the day, ultimately shares fell as the dollar strengthened.
Meanwhile, the spot price of crude oil ended lower on Tuesday, pulling back from a high of $72.
I think the best way to play commodities is to be flat, counsels Joe Terranova.
2ND WORST PERFORMER: CONSUMER SHARES
Consumer shares closed lower after Best Buy posted weaker-than-expected sales in its first quarter and suggested earnings for the rest of the year would be worse than forecast.
Household net worth is contracting, reminds Tim Seymour. I’m not surprised to hear these numbers. Consumers are retrenching.
Although Best Buy gained some market share from Circuit City’s bankruptcy I don’t think it was nearly what it should have been, adds Brian Kelly of Kanundrum Research
I think the move lower in Best Buy was unjust, counters Pete Najarian. In fact, I think Tuesday’s sell-off is an opportunity. Or if you don't like that trade look at Wal-Mart, he adds. They were one of the few retailers that performed relatively well on Tuesday.
TOPPING THE TAPE: RESEARCH IN MOTION
Tech investors are excited about the latest smartphone from Research In Motion which they hope can win market share among both executives and mainstream consumers.
The new model known as the BlackBerry Tour falls somewhere between the BlackBerry Curve, which has proved very popular with consumers, and the BlackBerry Bold, which RIM has aimed at high-end corporate users.
The new device will soon launch with Verizon and Sprint in the United States as its carriers.
RIMM has had double digit percentage moves on the back of earnings, reminds host Melissa Lee. That’s something to be ready for.
If RIMM pulls back to about $75 I’m a buyer, adds Joe Terranova. And I’m keeping my eye on Palm , he adds. I’m just not sure about the valuations.
TOPPING THE TAPE: HEALTH CARE
Healthcare finished the day as one of the few sectors closing higher after Sanford Bernstein upgraded Amgen to Outperform from Market Perform.
I think Amgen’s upgrade was all about their new cancer drug, muses Joe Terranova. I think it’s a great stock. But you might want to play the space with XBI and spread out the risk.
GSKalso got a lot of juice on Tuesday on a tough tape, adds Tim Seymour. It may be worth a look.
Genzyme pulled back on Tuesday, reminds host Melissa Lee. Is that a buying opportunity?
I’d wait, counsels Pete Najarian. It’s bounced off this level many times.
TOPPING THE TAPE: GOLDMAN SACHS
Although the broad banking sector finished in negative territory, Goldman Sachs bucked the trend to close higher.
And in after hours news, Melissa Lee explains that Goldman CEO Llyod Blankfein has drafted a letter to Rep. Barney Frank explaining they are on target to repay TARP money immediately.
In the sector I’m keeping my eye on Stifel Nicolaus, counsels Brian Kelly. I think they’re just great at executing their business plan.
Got something to to say? Send us an e-mail at firstname.lastname@example.org and your comment might be posted on the Rapid Recap. If you'd prefer to make a comment but not have it published on our website send those e-mails to email@example.com.
Trader disclosure: On June 16th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Terranova Owns (TER); (SDS); (ABT);Terranova Owns (RIMM) & Short (RIMM) Calls; Terranova Is Short (RIG); Terranova Owns (BRCM) & Short (BRCM) Calls; Terranova Owns (MS) & Short (MS) Calls; Terranova Is Short (FCX); Terranova Owns (GENZ) & Short (GENZ) Calls; Terranova Owns (HES) & Short (HES) Calls; Terranova Is Short (XOM) Call Spread; Terranova Owns (DIS) Call Spread; Terranova Owns (X) & Short (X) Calls; Terranova Owns (JPM) & Short (JPM) Calls; Terranova Owns (BTU) & Short (BTU) Calls; Terranova Is Short August Gold Futures; Terranova Owns (POT) & Short (POT) Calls; Terranova Is Short Septmeber Oil Futures; Terranova Owns December Oil Futures; Terranova Owns August Nat Gas Futures; Terranova Owns (IBM) & Short (IBM) Calls; Terranova Is Short (OIH) & (OIH) Calls; Najarian Owns (BX) Call Spread; Najarian Owns (F) & Short (F) Calls; Najarian Owns (FCX) Calls & Put Spread; Najarian Owns (GE) Calls; Najarian Owns (INTC) Call Spread; Najarian Owns (MOS) Put Spread; Najarian Owns (PALM) Calls; Najarian Owns (WNR); Najarian Owns (JPM) & Short (JPM) Calls; Najarian Owns (RIMM) Call Spread; Najaria Owns (LEA) Calls; Kelly Owns (UUP), (TLT), (AN), (UGA), (AMZN), (BBY), (DSX), (LOW), (PAL); Kelly Is Short (FXS); Seymour Owns (AAPL), (BAC), (BX), (EEM), (FXI), (FCX), (FITB), (TTM); Seymour's Firm Owns (NOK)
CNBC.com with wires