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Financials Weigh On Stocks Amid Criminal Probes

If the CDO don’t fit, you must acquit. That’s the chatter on Wall Street as the criminal probe into financial wrong-doing goes wide.

On Thursday, New York attorney general Andrew Cuomo launched an investigation into eight banks to determine whether they misled ratings agencies about mortgage securities.

His office is investigating Goldman Sachs, Morgan Stanley, UBS , Citigroup , Credit Suisse, Deutsche Bank, Credit Agricole and Merrill Lynch, which is now part of Bank of America.

Meanwhile, separately the WSJ says the SEC has launched other probes, which could result in additional civil suits.

These developments generated a strong headwind for the bulls; selling accelerated into the close with the Dow ending lower by triple digits. Should you hold your breath and buy the weakness?

Strategy Session with the Fast Money traders

With so many firms now facing charges a global settlement can’t be far behind, muses Gary Kaminksy. As far as what's gone on with the CDOs I think we see a big fine and then it will all be over.

I’m long Goldman calls, adds Karen Finerman. I agree that the banks pay a fine and we all move on. I think it's similar to the Spitzer settlement which ended well.

But even with settlement, I would not own the banks here, says Tim Seymour. Just looking at the action in the euro, I have to remind myself that all is not right in the world.

All is defintely not right with the world, adds Guy Adami. If the criminal probe was the only factor weighing on the market I'd agree with Karen and Gary. But China is slowing down and Cisco earnings were cautious.

I wouldn’t get so giddy about a settlement just yet. I think these banks get whacked with more headlines as we go through the year, counters Chris Whalen of Institutional Analystics. The politicians love this and they're going to milk it into November. I'd get used to it.

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WATCH OUT: EURO CRACKING AGAIN

The euro fell once again on Thursday but held the crucial 1.25 level against the dollar.

The euro’s march lower has many investors worried that nations may soon option out of the shared currency.

In his newsletter strategic investor Dennis Gartman writes, "We are witnessing the demise of what was for a while a worthy experiment in monetary and political union over a massively divergent series of populations....We expected dogs to lie down with cats and the US population to become devotees of cricket before we thought that Germany and Belgium would submit themselves to a combined government."

What’s the trade?

If you believe that dollar and euro are going to parity I’d stick with companies that are heavily exposed to the US, says Brian Kelly. I’m talking companies that sell things to people with dollars. Maybe look at Jack-In-The Box.

If you’re a currency trader I think we’re looking at 85.77 on the Dixie , says Tim Seymour.


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TOPPING THE TAPE: GOOGLE

Google topped the tape on Thursday, rallying in a market that saw the Nasdaq fall.

What should you make of it?

At 15 times earnings I really like Google here, says Karen Finerman. I understand there are distractions but the core business is phenomenal.

On a related note, I’d be careful of Baidu , says Tim Seymour.

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EAR TO THE WALL: CAPITAL MARKETS CANARY IN A COAL MINE?

Are capital markets the canary in the coal mine? According to Dealogic, last week saw the highest number of IPO withdrawls from the markets since October 2008.

And this week two IPOs, Tele-Nav and Noranda, lowered their offering prices.

What should you make of it?

It's not a good sign for the stock market, says Gary Kaminksy.

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OUTRAGE: JUSTICE AHEAD

Following last week's nearly 1,000 point midday drop, the SEC is now getting set to unveil new circuit breaker rules as early as next week.

CNBC’s Bob Pisani says the SEC will likely announced new circuit breaker rules on Monday but they could take as long as 60 days to implement.

Check out our entire conversation with Pisani. Watch the video now!









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Trader disclosure: On May 13, 2010, 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 (GS), (INTC), (MSFT), (AGU), (BTU), (NUE), (C); Finerman's Firm Is Short (IYR), (IWM), (MDY), (SPY); Finerman's Firm Is Long S&P Puts; Finerman Owns (AAPL); Finerman's Firm Owns (BAC), (BAC) Calls; Finerman Owns (BAC), (BAC) Preferred; Finerman's Firm Owns (BP), (BP) Calls; Finerman Owns (GOOG); Finerman's Firm And Finerman Own (JPM); Finerman's Firm Owns (KFT); Finerman's Firm And Finerman Own (RIG), (RIG) Calls; Finerman's Firm Owns (TGT); Finerman Owns (WFC) Preferred; Finerman's Firm Owns (WMT); Finerman Owns (IBM); Finerman Owns (GS) Calls; Finerman's Firm Owns (MCD), (IBM); Seymour Owns (AAPL), (BAC), (HAL), (MSFT); Kelly Owns (FXE) Puts; Kelly Owns (FXB) Puts; Kelly Owns (SPY) Puts; Stutland Owns (SLV) Calls, Is Short (SLV) Puts; Kinahan Owns (AKS), (C), (MSFT), (CSCO), (WFC), (YHOO); Kinahan Is Short (SPY); Grasso Owns (BP), (NDAQ), (DYN), (LPX), (ASTM), (ABK), (BAC), (BGP), (C), (CVGI), (JPM), (PRST), (PFE), (BA), (T), (CSCO), (X)

For Brian Kelly
Kanundrum Capital Is Long U.S. Dollar
Kanundrum Capital Owns (GLD)
Kanundrum Capital Owns (GFI)
Kanundrum Capital Owns (AUY)
Kanundrum Capital Is Short Euro
Kanundrum Capital Is Short Yen
Kanundrum Capital Is Short Pound
Kanundrum Capital Is Short Franc
Kanundrum Capital Is Short (IBM)
Kanundrum Capital Is Short (XOM)
Kanundrum Capital Is Short (HES)
Kanundrum Capital Is Short (NUE)
Kanundrum Capital Is Short (DB)
Kanundrum Capital Is Short (BCS)
Kanundrum Capital Is Short (XLF)
Kanundrum Capital Is Short (XLK)
Kanundrum Capital Is Short (XLI)
Kanundrum Capital Is Short (XLY)
Kanundrum Capital Is Short (XLV)

For Hilary Kramer
A&G Capital Is Short (VZ)
A&G Capital Is Short (QQQQ)
A&G Capital Owns (RIG)
A&G Capital Owns (SCHN)
A&G Capital Owns (GS)
A&G Capital Owns (MSFT)
A&G Capital Owns (SLB)
Kramer Is A Hedge Fund Client Of (GS)


For Steve Grasso
Stuart Frankel And Its Partners Own (AMR)
Stuart Frankel And Its Partners Own (BAX)
Stuart Frankel And Its Partners Own (DYN)
Stuart Frankel And Its Partners Own (CUBA)
Stuart Frankel And Its Partners Own (DYN)
Stuart Frankel And Its Partners Own (GERN)
Stuart Frankel And Its Partners Own (HSPO)
Stuart Frankel And Its Partners Own (MERC)
Stuart Frankel And Its Partners Own (NWS.A)
Stuart Frankel And Its Partners Own (NYX)
Stuart Frankel And Its Partners Own (PALM)
Stuart Frankel And Its Partners Own (PDE)
Stuart Frankel And Its Partners Own (PFE)
Stuart Frankel And Its Partners Own (PRST)
Stuart Frankel And Its Partners Own (RDC)
Stuart Frankel And Its Partners Own (TLM)
Stuart Frankel And Its Partners Own (XRX)
Stuart Frankel And Its Partners Own (SDS)
Stuart Frankel And Its Partners Are Short (QQQQ)
Stuart Frankel And Its Partners Are Short (CL)
Stuart Frankel And Its Partners Are Short (AAPL)

For Patty Edwards
Edwards Owns (HD) For Clients
Edwards Owns (BKE) For Clients
Edwards Owns (COST) For Clients
Edwards Owns (JCG) For Clients
Edwards Owns (COH) For Clients

For Robert Mackenzie
FBR Capital Markets Is A Market Maker Or Liquidity Provider For (RIG)
FBR Capital Markets Analyst(s) Own (RIG)
FBR Capital Markets Is A Market Maker Or Liquidity Provider For (SLB)




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