Fear trumped greed on Wednesday with both the S&P and Dow closing in negative territory.
The bulls just couldn’t gain traction after three negative catalysts dragged down investor sentiment. They follow:
1) The euro rolled over amid chatter of a wider crisis;
2) Oil rig stocks dropped on reports that the Gulf spill could get worse;
3) Goldman shares slipped despite an attempt by CEO Lloyd Blankfein to quell investors nerves on a conference call.
Should you buy the weakness or run for the hills?
When the S&P declines 2% or more in any given day usually the market sees some kind of a gain the next day, explains host Melissa Lee. That’s been true since the March lows according to research compiled by Bespoke.
I’m watching 1150 in the S&P as a critical level of supprt, says Joe Terranova. But before investors make any big decisions, I’d suggest waiting for the jobs report on Friday.
I’d also watch the Vix as a point of reference for how much fear is in the market, says Pete Najarian. 22.5 could be a critical level.
Want more than a broad market bets? Keep reading. The Fast Money gang breaks it all down! Then, tell which fear-filled stock is the best buy right now.
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PART 1: GOLDMAN FALLS IN AFTERNOON TRADING
Shares of Goldman Sachs failed to hold early gains following an afternoon conference call with investors. Veteran trader Gary Kaminsky was on the call.
What should you make of it?
I listened to the call and if I was a high net worth client I probably hung up with more questions than I had going in, says Kaminksy. My sense is that they have to change the management team and those changes may be coming kinda’ soon.
Dick Bove of Rochdale securities thinks a few things have to happen before Goldman stock starts to rise.
If the government walks away from Goldman Sachs with the same management team in tact then I don’t think they will have succeeded in what they’re attempting to do, says Bove.
I expect to see management changes, a new mission statement and I expect they fine Goldman $1 billion.
When all those things happen then the stock should start to rise, Bove concludes.
What’s the trade?
I bought calls, says Karen Finerman. GS tends to not sell-off as badly each time bad news comes out. I think there’s upside but I’d only play it with calls to limit the downside.
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PART 2: CONTAGION UPDATE
Nothing could soothe investor nerves about the weakness in Europe after riots broke out in Greece and new chatter surfaced about the financial woes vexing Spain and Portugal. By the end of trade, the euro had dropped to a 14-month low.
How should you be positioned?
I think the euro is looking at 1.25, says Brian Kelly. That’s the low from back in October.
I’m concerned about the social unrest, adds Joe Terranova. Because of that I don’t think the euro gets any relief anytime soon.
If you’re looking for some equity ideas, following are the names most vulnerable to a weaker euro / strong dollar move, explains host Melissa Lee, as compiled by UBS.
Household Prod. Makers With Most Exposure to Euro
% of Sales in Euro
Procter & Gamble (PG) 18%
Colgate-Palmolive (CL) 17%
Estee Lauder (EL) 11%
Energizer (ENR) 8%
Church & Dwight (CHD) 6%
Source: UBS
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PART 3: GULF STOCKS GIVE BACK GAINS
Most of the gulf stocks traded higher on Wednesday but gave up gains in the late afternoon with the exception of BP , which managed to stay in positive territory.
How should you be positioned now?
I may have bought into the fear too early but I really think the sell-off in this space is overdone, says Karen Finerman.
I wouldn't go near these names. I’m hearing about a potential moratorium on deep-water drilling greater than 5,000 feet, counters Joe Terranova. In the near term I think there’s more pain for companies such as Transocean .
Options action suggests to me traders are looking for some upside, muses Pete Najarian.
What do you think? We want to know!
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Trader disclosure: On May 5, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Terranova Owns (C) May Calls; Terranova Owns (PFE), (SWN), (XCO), (TER); Terranova Is Long Gold June 2010 Futures; Terranova Is Short (CMA); Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY); Finerman's Firm Is Long S&P Puts; Finerman Owns (AAPL); Finerman's Firm Owns (AEO), (AEO) Calls; Finerman's Firm Owns (BAC), (BAC) Calls; Finerman Owns (BAC), (BAC) Preferred; Finerman's Firm Owns (BP) Calls; Finerman Owns (GOOG); Finerman Owns (GS) Calls; Finerman's Firm Owns (IBM); Finerman's Firm And Finerman Own (RIG), (RIG) Calls; Finerman Owns (WFC) Preferred; Najarian Owns (C) Calls; Najarian Owns (CLF) Call Spread; Najarian Owns (LPX) Call Spread; Najarian Owns (MS); Najarian Owns (PFE); Najarian Owns (YHOO) Call Spread; Kelly Owns (FXE) Puts; Kelly Owns (FXB) Puts; Levy Owns (GS)
For Joe Terranova:
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (DRYS)
For Brian Kelly
Kanundrum Capital Is Long U.S. Dollars
Kanundrum Capital Owns (TLT)
Kanundrum Capital Is Long (GLD)
Kanundrum Captial Owns (GFI)
Kanundrum Capital Is Long (AUY)
Kanundrum Capital Is Long (GFI)
Kanundrum Capital Is Short Euro
Kanundrum Capital Is Short Yen
Kanundrum Capital Is Short Pound
Kanundrum Capital Is Short Franc
Kanundrum Capital Is Short (USO)
Kanundrum Capital Is Short (RSX)
Kanundrum Capital Is Short (FXI)
Kanundrum Capital Is Short (DE)
Kanundrum Capital Is Short (NUE)
Kanundrum Capital Is Short (SU)
Kanundrum Capital Is Short (EXPE)
Kanundrum Capital Is Short (XOM)
Kanundrum Capital Is Short (HES)
Kanundrum Captial Is Short (CLF)
Kanundrum Captial Is Short (TSL)
Kanundrum Captial Is Short (HBC)
Kanundrum Captial Is Short (BCS)
Kanundrum Captial Is Short (DB)
Kanundrum Captial Is Short (NUE)
Kanundrum Captial Is Short (IBM)
For Anthony Scaramucci:
Scaramucci Owns (AAPL), Skybridge Owns (AAPL)
Scaramucci Owns (BAC), Skybridge Owns (BAC)
Scaramucci Owns (C), Skybridge Owns (C)
Scaramucci Owns (GOOG), Skybridge Owns (GOOG)
Scaramucci Owns (GS), Skybridge Owns (GS)
Scaramucci Owns (JPM), Skybridge Owns (JPM)
Scaramucci Is Long U.S. Dollar, Skybridge Is Long U.S. Dollar
For Hilary Kramer
A&G Capital Owns (PMI)
A&G Capital Owns (MTG)
A&G Capital Owns (XCO)
A&G Capital Owns (GS)
A&G Capital Owns (MS)
A&G Capital Owns (QQQQ)
Hilary Kramer Is A Client Of Goldman Sachs
For Jared Levy
Peak6 Investments Is Long And Has An Options Position In (GS)
Peak6 Investments Is Long And Has An Options Position In (JPM)
Peak6 Investments Is Long And Has An Options Position In (C)
Peak6 Investments Is Long And Has An Options Position In (BAC)
Peak6 Investments Is Long And Has An Options Position In (WFC)
Peak6 Investments Is Long And Has An Options Position In (AA)
Peak6 Investments Is Long And Has An Options Position In (USO)
Peak6 Investments Is Long And Has An Options Position In (OIH)
Peak6 Investments Is Long And Has An Options Position In (COP)
Peak6 Investments Is Long And Has An Options Position In (PMI)
Peak6 Investments Is Long And Has An Options Position In (BP)
Peak6 Investments Is Long And Has An Options Position In (AAPL)
Peak6 Investments Is Short And Has An Options Position In (MS)
Peak6 Investments Is Short And Has An Options Position In (XLF)
Peak6 Investments Is Short And Has An Options Position In (FCX)
Peak6 Investments Is Short And Has An Options Position In (SPY)
Peak6 Investments Is Short And Has An Options Position In (QQQQ)
Peak6 Investments Is Short And Has An Options Position In (XOM)
Peak6 Investments Is Short And Has An Options Position In (CVX)
Peak6 Investments Is Short And Has An Options Position In (MTG)
Peak6 Investments Is Short And Has An Options Position In (RDN)
Peak6 Investments Is Short And Has An Options Position In (RIG)
For Mike Khouw
Cantor Firtzgerald & Co. Is A Market Maker In (CLF)
For Stephen Weiss
Weiss Owns (HD), (MWA), (BP), (MRK), (HBAN), (NMM), (FRO), (WCBO)
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