As we’ve been telling you, fears of a spreading global banking crisis weighed on Wall Street Tuesday. Investors feared Britain’s second government bailout in recent months might be a move to fully nationalize some banks in the UK. (The British government has increased its stake in the Royal Bank of Scotland to nearly 70 percent.)
That, in turn, dragged the US stock market lower, with investors looking at the situation with increased concern that we could see a nationalization here in the US, explains Maria Bartiromo on CNBC's Closing Bell. Stocks like Bank of America , Citigroup and JP Morgan all dropped substantially.
Wouldn’t it be nice if the broad stock market would climb, despite financials? Maybe that day is coming!
“You (probably) don’t need the financial stocks to rally for the broad market to rally. You just need them to be functional,” says Zach Karabell. And he’s not the only Fast Money trader who has that opinion. Guy Adami concurs. All that’s needed is --- “for banks to stop the bleeding,” he says.
That’s partly because equity market cap has been eviscerated by the crisis, and now financials are a smaller and smaller percentage of the indexes.
Take a look:
In 2007: Financials were 17.6% of S&P - #1 largest sector
In 2009: Financials were 11.6% of S&P - #5 largest sector
In fact, around the world, telecom, utilities and materials sectors are able to rise -- even when financials go down. For example, on Monday the FTSE didn’t sell-off even though news from the financial sector couldn’t have been worse. (That’s when Britain launched that second bank rescue plan.)
In other words, we may be starting to see de-coupling. “It would be a positive sign for the indexes to de-couple from the financials,” Karabell adds. “Also there was intense euphoria around the nation about the inauguration. Essentially Main Street could pull Wall Street higher.”
Of course you still need credit for a recovery. That won’t change. But maybe we won't have to wait for financials to lead us out of this mess, after all.
Balderdash, bristles Jeff Macke.
And, in case you're looking for a longer term trade (i.e. 6 months) look at industrials and technology , says Karabell.
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Trader disclosure: On Jan. 20th, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (C), (BAC), (TM), (SDS); Adami Owns (AGU), (C), (BTU), (GS), (INTC), (MSFT), (NUE); Seymour Owns (AA), (AAPL), (BAC), (F), (EEM), (FXI), (TSO); Najarian Owns (MS), (PALM) ; Najarian Owns (EEM) Call Spread; Najarian Owns (FCX) & (FCX) Short Calls; Najarian Owns (MS) Short Calls & Short Put Spread; Najarian Owns (NVLS) Calls; Najarian Owns (XME) Long Calls; Najarian Owns (IYR) Puts