S&P futures shot lower in extended trade with Wall Street traders throwing their hands up in disgust.
The squabbling over the debt deal took a new turn with lawmakers postponing a critical House vote at the last minute.
Investors took the developments as a sign the GOP, which is the majority party in the House, wasn’t as unified as party leaders had suggested.
Market pros were wondering if conservative lawmakers that are part of the Tea Party movement were again balking at Speaker John Boehner’s bill because it didn’t contain the severe spending cuts they demand.
”You don’t bring a bill before the House if you don’t have the votes,” explains CNBC’s Eamon Javers.
“They’re getting dangerously close to a TARP 2 style moment where a complete lack of action may be most scary to the markets,” adds CNBC’s Ron Insana.
Failure to raise the debt limit by August 2 could trigger a payments crunch that would shake the global financial system and could tip the United States back into recession.
And those amplified fears may be enough to trigger sharp selling on Friday. “The fact is, the market closed negative,” says Fast trader Guy Adami. “I’d have expected a relief rally.” And now this.
”I fully expect to see the S&P downgrade the US credit rating within the next 60 days,” adds Fast trader Joe Terranova.
With so much dissent in Washington, he doesn’t think it’s now even remotely possible that lawmakers agree on $4 trillion in reductions over 10 years and without that, S&P has threatened to downgrade the credit rating of our nation.
Although the stock market may sell first and ask questions later, Ed Groshans of Height analytics does not expect that kind of whoosh lower in the bond market. “In the event of a downgrade from S&P – I don’t think we’ll see a massive leg down in Treasurys – I think it will be a slow re-pricing,” he says.
And then there are other pros who think the whole debt ceiling debacle is simply a riveting summer drama – but just that, a drama.
”I think the whole thing is overdone,” says trader Steve Grasso.
David Greenberg, president of Sterling Commodities largely agrees. He says commodities markets tell the story. “Gold hasn’t moved much on the debt ceiling impasse and crude oil is just lying there,” he says. “If we’re 3 days away from Armageddon gold and crude should be going through the roof.”
In fact, Grasso thinks this is the 'when things look their worst - buy' kind of moment. In other words his trade is long stocks. I’d be buying the market right now,” he says, while keeping a close eye on 1285. “Only if the market trades down to that level, the 200-day, only then would I reassess.”
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Trader disclosure: On July 28, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Steve Grasso owns (AMD)’ Steve Grasso owns (ASTM); Steve Grasso owns (BA); Steve Grasso owns (BAC); Steve Grasso owns (C); Steve Grasso owns (D); Steve Grasso owns (JPM); Steve Grasso owns (LIT); Steve Grasso owns (LPX); Steve Grasso owns (LVS); Steve Grasso owns (MAR); Steve Grasso owns (MHY); Steve Grasso owns (NDAQ); Steve Grasso owns (PFE); Steve Grasso owns (PRST); Steve Grasso owns (UAL); Steve Grasso owns (XHB); Steve Grasso owns (XLB); Steve Grasso owns (XLI); Terranova owns (XOM); Terranova owns (DIS); Terranova owns (WFM); Terranova owns (LULU); Terranova owns (MSFT); Terranova owns (TM); Terranova owns (JWN); Terranova owns (MCD); Terranova owns (PEP); Terranova owns (MA); Terranova owns (BX); Terranova owns (GS); Terranova owns (DAR); Terranova owns (CAT); Terranova owns (VRTS); Terranova owns (AAPL); Terranova owns (F); Terranova owns (CVI); Terranova owns (IBM); Terranova owns (FCX); Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU)
For Steve Grasso
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Stuart Frankel & Co and its partners own (HPQ)
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Stuart Frankel & Co and its partners own (MET)
Stuart Frankel & Co and its partners own (MU)
Stuart Frankel & Co and its partners own (NYX)
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Stuart Frankel & Co and its partners own (UAL)
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Stuart Frankel & Co and its partners are short (QQQQ)
For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of Building Materials Holdings
Virtus Investment Partners Owns More Than 1% Of (CASS)
Virtus Investment Partners Owns More Than 1% Of (CSVI)
Virtus Investment Partners Owns More Than 1% Of (EXR)
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Virtus Investment Partners Owns More Than 1% Of (LHO)
Virtus Investment Partners Owns More Than 1% Of (NRCI)
Virtus Investment Partners Owns More Than 1% Of Sun Pharmaceutical Industries Ltd
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (RLI)
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 (XLE)
Virtus Investment Partners Owns More Than 1% Of (XLF)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLK)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (SUBK)
Virtus Investment Partners Owns More Than 1% Of (WDFC)
Virtus Investment Partners Owns More Than 1% Of (YDNT)
Virtus Investment Partners Owns More Than 1% Of Domino's Pizza UK & IRL PLC
ED GROSHANS
**No disclosures
MATT FABIAN
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GEORGE GONCALVES
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