In the wake of a stunning after-hours announcement from JPMorgan Chase, the Fast Money traders say you may need to re-evaluate everything.
In an unexpected after-hours call with investors, CEO Jamie Dimon saidJPMorgan was facing massive losses — losses of $4.2 billion were reasonably possible, he said — with trading losses totaling $800 million in the second quarter.
Dimon also said it could take until the end of the year to restructure the portfolio.
Although information was still coming together at the time of writing, the Fast Money traders say developments look like they’re a game changer.
“This is the last thing the financials need,” said trader Steve Grasso.
“It’s going to raise questions — not only at JPMorgan, but across the entire industry,” added Joe Terranova. “It makes me wonder if there are other portfolios that need to be marked to market. Money pros will ask, what is the impact? And how far does it extend? Who else holds what appears to be lousy paper?”
And in this kind of environment, money pros tend to sell first and ask questions later.
“I will dump my(Bank of America) on this news,” Terranova said.
“I can almost guarantee it’s not just JPMorgan,” added trader Guy Adami.
“JPMorgan looks like it’s going to bring down the entire space,” said Steve Grasso.
In other words, all the traders are expecting financials to selloff broadly on Friday.
“The sector hasn’t been doing well anyway,” explained Steve Grasso. “The group has been breaking down. This feels like it could be a nail in the coffin.”
And it's not just these developments that will likely weigh on banks stocks.
Trader Keith McCullough pointed to another big risk in the space. “Chatter on the Street says Morgan Stanley is looking at a rating downgrade,” he said. That certainly doesn’t help.
If the financials do plunge on Friday, because the market is already nervous, Guy Adami cautioned that the ripple from this development could take the entire market down.
The level “1340 is now the bogie in the S&P 500 — if the S&P breaks that level, you should revaluate everything you own,” Adami said.
Terranova agreed: “The revelation of this news in a market that’s already teetering on a breakdown is a big problem.”
If you’re very short-term, trader Jon Najarian sees a trade. He’s a buyer of JPMorgan on the decline against a short position in Goldman Sachs.” (NOTE: This is a trade.)
If you’re a retail investor pro trader, Steve Grasso said stay away. "Retail investors can't move as quickly as DocJ."
If you're a buy and hold investor, Keith McCullough said the decline is not an opportunity. “It’s cheap, but value will not be a catalyst here,” he said.
— Posted by CNBC’s Lee Brodie
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Trader disclosure: On May 10, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Joe Terranova is long VRTS; Joe Terranova is long MCD; Joe Terranova is long BAC; Joe Terranova is long SBUX; Joe Terranova is long JPM; Joe Terranova is long UPL; Joe Terranova is long CHKM; Joe Terranova is long HPQ; Joe Terranova is long LQD; Steven Grasso is long ASTM; Steven Grasso is long AVAV; Steven Grasso is long BA; Steven Grasso is long D; Steven Grasso is long FRO; Steven Grasso is long LNG; Steven Grasso is long MHY; Steven Grasso is long NUAN; Steven Grasso is long MO; Steven Grasso is long PFE; Steven Grasso is long PRST; Steven Grasso is long S; Steven Grasso is long XLU; Steven Grasso is long ZAZA
For Keith McCullough
Nothing to disclose
For Steve Suttmeier
Nothing to disclose
For Dana Telsey
Nothing to disclose
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