For over a week bulls have been looking for a catalyst to end the recent rout of selling and on Thursday, they finally got something.
The U.S. trade deficit shrank unexpectedly in April with our nation selling a record $175.6 billion in goods an services overseas. That was the first positive economic point in quite some time.
On the news investors snapped up financial and energy stocks driving both sector sharply higher.
Will future economic data also reflect this kind of optimism? Has the tide finally started to turn? How should you position now?
Instant Insights with the Fast Money traders
Looking at the economic data, trader Steve Grasso thinks the Street is far more focussed on the recent ISM number - especially the 10 point drop in new orders. "That was the game changer," he says.
As a result he thinks Thursday's gains are nothing more than an oversold bounce. “You’re talking about 6 days down,” says Grasso.
Looking at the technicals, Grasso remains skeptical. “We got just above the 150-day and we stalled right below 1295.”
And Grasso is also bearish on fundamentals. “I think margins have peaked and the global growth story is in question.” Grasso is particularly concerned about the upcoming earnings season. “I don’t think we’re going to see the margins that we once did, to get the market to this level.”
What would change Grasso's tune? “I’d need to see us above 1315 before I could consider (Thursday's market) anything but a dead cat bounce.”
Trader Stephen Weiss is equally cautious. “I’m not certain the market will continue to make gains,” he says. Although Weiss thinks the market may overcorrect again on Friday, he also thinks the next big move is lower.
Trader Zach Karabell is a bit more optimistic. He reminds the desk that the market has not had a fundamental breakdown. He sees the recent malaise in the market more like a period of quiet rather than weakness. Karabell remains bullish in the long term and thinks sell-offs provide opportunities. That’s not to say you should dive into the deep end. “This is a market where you dip but don’t plunge,” he says.
EAR TO THE WALL: CHINA
As one of the biggest holders of U.S. Treasurys - China has a lot at stake when it comes to the value of our debt and our dollar. But recently, officials there have been getting more concerned. On Tuesday, in a comment that was later removed from a Chinese government website, on official wrote: "We must be alert of economic and political risks in excessive holdings of U.S. dollar assets."
And today China's central bank advisor Li Daokui said, "The U.S. is playing with fire over its debt ceiling debate and, there is a risk a U.S. debt default may happen."
To make sense of these remarks and talk about China's boom in growth the traders turned to David Riedel, the president of Riedel Research.
It’s a conversation you won’t want to miss. Watch the video now!