HALFTIME REPORT: WORST PRE-4TH SELL-OFF IN A HUNDRED YEARS?
Nearly all of the 30 blue chip stocks that make up the Dow were trading lower around lunchtime on Thursday after Labor Department data showed employers slashed 467,000 jobs in June, a number that was far worse than expected.
According to CNBC research, Thursday’s Dow’s plunge could be the worst pre-4th of July holiday sell-off in about a hundred years. Unless the market makes big gains during the afternoon, percentage wise it could be a day the likes we’ve never seen before.
How should you be positioned?
The S&P has broken its 50-day moving average but I think the jobs number was an excuse to throw the market down, muses Fast Money trader Tim Seymour. It gave bears ammunition. Personally, I didn’t find the data that much of a surprise.
The number was a slap in the face, adds Jim Iurio of TJM. It suggests the recession will probably be measured in years not months. The way we traded the last quarter – buying consumer stocks – was probably a bit premature. Instread I’d look at consumer staples – names such as General Mills.
And don’t forget this is a day before a holiday, adds Jared Levy of Peak6, so volume is lower. As a result there are fewer buyers to absorb the sells and that could be behind the day’s market action. Personally I’m a buyer.
When the market sells off on the assumption that the data is directly correlated to corporate performance, I think it’s a good opportunity to look at companies not implicated by the jobs number, says Zach Karabell. For example Chinese internet names are selling off and they have absolutely nothing to do with the US jobs number.
JOB LOSSES SEND TRADERS BACK TO GREENBACK
Gold fell below $930 per ounce on Thursday as the dollar rose versus a basket of six currencies due to the worse than expected jobs number. "The dollar has gone up because the data has made everyone nervous, buying government bonds as a safe-haven asset," explains Matthew Turner, an analyst at VM Group.
What’s the trade?
It puts enormous pressure on the resource space, reminds Tim Seymour. And it puts pressure on emerging markets.
I’m not terribly concerned, counters Zach Karabell. I think the global commodity trade remains in tact, though cyclically in the summer commodities tend to dip.
OPTIONS ACTION: AMERICAN EXPRESS
Jared Levy has spotted an unusual volume of options trading in American Express .
I’m seeing a big buyer of the August 23 puts, Levy says. But I don’t think it’s a bet the stock goes lower; instead I think it’s an investor protecting themselves against upcoming earnings. It seems investors are fearful and they’re looking for protection.
OIL DIPS BELOW $67
Swelling gasoline stocks and the far-bigger-than-expected rise in U.S. unemployment drove the spot price of oil down more than $2 Thursday to below $67 a barrel.
What’s the oil trade?
I think the trade is flat, counsels Fast Money trader Joe Terranova. I’d wait for earnings season before really developing a larger thesis on the move in oil. Personally I expect the oil services names to get hot again before the end of the year.
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Trader disclosure: On July 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's Firm Owns (PBR) Puts
Iuorio Owns (XLU)
Iuorio Owns (SDS)
Iuorio Owns (GIS)
Levy's Firm Is Short (UUP)
Levy's Firm Owns (GLD) And Has An Options Position In (GLD)
Levy's Firm Is Short (LUV) And Has An Options Position In (LUV)
Levy's Firm Owns (UAUA) And Has An Options Position In (UAUA)
Levy's Firm Owns (DAL) And Has An Options Position In (DAL)
Levy's Firm Is Short (JBLU) And Has An Options Position In (JBLU)
Levy's Firm Is Short (AMR) And Has An Options Position In (AMR)
Levy's Firm Owns (AXP) And Has An Options Position In (AXP)
Levy's Firm Owns (USO) And Has An Options Position In (USO)
Levy's Firm Owns (UNG) And Has An Options Position In (UNG)
Levy's Firm Is Short (RIMM) And Has An Options Position In (RIMM)
Levy's Firm Is Short (POT) And Has An Options Position In (POT)
Levy's Firm Owns (PBR) And Has An Options Position In (PBR)
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