If you’re looking for a weak spot in the market look no further than the banks.
The XLF is down 25% ytd, with BofA flirting with the psychologically dangerous $5 level, after S&P downgraded this company as well as Citigroup, Goldman , Morgan Stanley and Wells Fargo after the bell, Tuesday.
Considering the market doesn’t have great confidence in the banking sector to begin with, will the downgrade be the proverbial straw that breaks the camel’s back?
Probably not. The Fast Money traders caution investors not to make too much of the downgrade.
”If anything S&P is late,” says top hedge fund manager Anthony Scaramucci. “I don’t expect to see the market revalue these stocks lower.”
Trader Karen Finerman agrees. “I don’t expect the downgrade to have a dramatic effect on the banks either,” she says.
In fact, Scaramucci and OptionMonster Jon Najarian both think the S&P downgrade could be a sign of the bottom.
“When they downgrade that’s usually the end of the bad news,” says Najarian. “I’m seeing call buying. That suggests BofA could move up.”
If the traders are right and it's all baked in, that begs the question, why haven't they rallied sooner?
”They banned short selling in Europe and a lot of investors are using these banks as proxies," explains Scaramucci. That’s what’s pressuring US banks right now,” not the downgrade.
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Trader disclosure: On November 29, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Joe Terranova owns (VRTS), (AXP), (LULU), (DECK), (SBUX), (CAT), (CSCO), (HES), (SU), (EMC), (IBM); Tim Seymour owns (AAPL), (BAC), (INTC); Karen Finerman owns (AAPL), (BAC), (JPM), (YHOO), (IBM); Guy Adami owns (C), (GS), (INTC)
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