Both the Dow and S&P closed lower on Thursday with selling accelerating into the close largely due to jitters about Friday’s jobs report.
The bulls just couldn’t overcome the negative sentiment generated by new economic data, which showed the services sector shrank unexpectedly in November.
And as the day went on, more worries surfaced. This time investors feared a massive equity offering from Bank of America -- needed to repay TARP -- could mean other banks will make a similar move and dilute existing shareholders' equity.
How should you be trading in this environment?
Strategy Session with the Fast Money traders
The end of the day’s action was very bad, muses Dennis Gartman. Not a good close at all.
Apple and Goldman both rolled over, says Guy Adami. Those stocks may be trying to tell you something. Both stocks led the market higher and they may lead it lower, now.
Based on the price action and the tape, selling was the thing to do on Thursday, adds Joe Terranova.
BANK OF AMER. OFFERING
As you likely know, after the bell Wednesday, BofA stunned the Street by announcing it would pay all $45 billion in TARP funds -- and as a result -- wriggle free from government restrictions on executive pay as well as other restrictions that come along with bailout funds.
Perhaps the most important aspect of these developments – at least to traders -- was the announcement that BofA would sell up to $18.8 billion in securities that will convert into common stock once shareholders approve an increase in its share count. (The remainder of the $45 billion would be repaid through $26.2 billion in cash.)
Although the offering was originally scheduled for Monday, the bank made the offering on Thursday due to strong demand. After hours, the securities sold at $15 each, about 5 percent below where Bank of America shares closed on Thursday.
What must you know about this trade?
The fact that BofA closed higher makes no sense to me, says Dennis Gartman. The offering is dilative.
I see it differently, counters Joe Terranova. Repaying the TARP removes so much uncertainty it makes me bullish. It’s a story that goes well beyond this event. I think it could be a $25 stock.
STILL UNDER THE TARP
What They Still Owe YTD Perfomance
C: $45B -39%
WFC: $25B -7%
PNC: $7.5B +10%
FITB: $3.4B +28%
KEY: $2.5B -28%
STI: $4.9B -22%
RF: $3.5B -27%
MARKET BUZZKILL: RETAIL
The XRT traded lower on Thursday after new data showed retailers from Macy's to Costco posted much weaker-than-expected sales for November as shoppers focused only on big bargains at the start of the key holiday selling season.
The Thomson Reuters same-store sales index rose 0.5 percent for the month, falling far short of Wall Street expectations for a 2.1 percent increase.
What’s the retail trade?
I would step back from Amex, Visa and Mastercard, says Joe Terranova. Amazon however just continues to march higher. I think that's the story right now.
I’m bearish on Abercrombie , adds Guy Adami. The stock was down and I think it should go down more. I’d go short.
I’m still bullish on TJX, reveals Pete Najarian.
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Trader disclosure: On December 3rd, 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 (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Najarian Owns (AAPL) Call Spread; Najarian Owns ((BAC) Call Spread; Najarian Owns (INTC) & Short (INTC) Calls; Najarian Owns (DELL) Calls; Najarian Owns (TJX); Najarian Owns (TXN); Najarian Owns (FCX) Call Spread; Najarian Owns (INTC) & (INTC) Calls; Najarian Owns (UAUA) Call Spread
For Dennis Gartman
Funds Managed By Dennis Gartman Own (AAPL)
Funds Managed By Dennis Gartman Own (FCX)
Funds Managed By Dennis Gartman Owns (GLD)
Funds Managed By Dennis Gartman Are Short (GS)
Funds Managed By Dennis Gartman Are SHort (JCP)
Fund Managed By Dennis Gartman Own Gold
For Jeff Harte
Sandler O'Neill Expects To Receive Compensation From (BAC)
(BAC) Is A Client of Sandler O'Neill
Sandler O'Neill Has Received Compensation From (C)
Sandler O'Neill Expects To Receive Compensation From (GS)
(GS) is A Client of Sandler O'Neill
Sandler O'Neill Has Received Compensation From (JPM)
(JPM) is A Client of Sandler O'Neill
Sandler O'Neill Has Received Compensation From (MS)
(MS) is A Client of Sandler O'Neill
CNBC.com with wires