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Fast Money

Will Weak Economy Drag Down Stocks?


Tuesday’s weaker than expected consumer confidence data cast an ominous shadow over stocks and nearly extinguished positive sentiment including hopes that the downward spiral may be moderating. To make matters worse the resulting sell-off in the market was broad and hit all of the S&P's ten sectors.

"(The consumer confidence data) kind of took the wind out of things a little bit," explains Kevin Kruszenski of KeyBanc. “This one kind of came out of left field."

Now, even the most bullish investors are starting to wonder if Tuesday’s sell-off signals a longer market pause.

And they may get their answer as soon as Thursday with the latest employment data. According to Reuters estimates, the unemployment rate is expected to rise to a 26-year high of 9.6 percent from May's 9.4 percent.

Weak employment data is hardly new, but this latest batch of numbers could be particularly damaging as mounting U.S. job losses have been weighing on consumer spending -- a pillar of economic growth. As you might know, consumer spending accounts for more than two-thirds of economic activity in the United States.

So how should you trade?

Economy To Pick Up In Q3?

If chief economist David Rosenberg of Gluskin Sheff is on target, every piece of positive news imaginable is already priced into the market and the trend is lower -- much lower.

Not only will jobs data -- and other economic data -- be sobering but he tells Fast Money July earnings could be also dismal. Put that all together and investors could be facing an enormous drag on stocks.

Okay, we know Rosenberg is not a glass-is-half-full kind of person. In fact, he was very skeptical of the rally to begin with noting that “this market is being driven more by technicals than fundamentals.”

We realize that doesn't take into account that valuations were at historic lows in March and that a substantial amount of money was -- and remains -- on the sidelines.

However Rosenberg can't be swayed. He reamins bearish arguing that oil prices don’t appear sustainable and the broad economy is nowhere near the end of recession.

What’s the bottom line? “I’m not saying we’re going back and test 666 but I do think we’re going to have a correction over the next 6 months.” Rosenberg says.

What do you think? We want to know!

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Trader disclosure: On June 30th, 2009, 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 (C), (GS), (BTU), (AGU), (INTC), (MSFT), (NUE); Terranova Owns (TER), (RIMM), (MSFT), (XBI), (ABT); Finerman Owns (RIG); Finerman's Firm Own (NOK), (PBR), (RIG), (WMT), (FCN), (TBT), (ELX); FInerman's Firm Owns (WFC) Preferred; Finerman Owns (WFC) Preferred; Finerman's Firm Owns (BAC) Preferred; Finerman Owns (BAC) Preferred; Finerman's Firm Is Short (IJR), (IYR), (MDX), (SPY), (USO); Najarian Owns (F) Call Spread; Najarian Owns (GS) Call Spread; Najarian Owns (INTC) & Short (INTC) Calls; Najarian Owns (JPM) & Short (JPM) calls; Najarian Owns (PALM) Call Spread; Najarian Owns (WNR) & Short (WNR) Calls; Najarian Owns (YHOO) Call Spread