The Tuesday after Labor Day is rarely a happy day for school age children, but this year it was no picnic for investors either. In fact, chatter on the floor suggested this Tuesday after Labor Day may be remembered as the day the game changed.
Largely, the talk was triggered by a drastic move by Switzerland, which – in an effort to protect its exporters - unilaterally set a floor on the franc's exchange rate against the euro at 1.2, roiling currency markets.
The move forced a re-allocation effectively calling into question the Swiss franc as a safe haven. ”Everything is now in play,” muses Fast trader Joe Terranova. “This changes the money flows around.”
And the big issue – the game changer if you will – is what happens to the US dollar in the wake of these developments. “The dollar may recapture some of its lost luster,” Terranova explains.
That may sound very patriotic but if that happens, "if the secular downtrend in the dollar reverses – if it begins to get stronger - that will have a major, major impact on stocks,” Terranova says. “That would be a huge game changer for the trading community.”
The S&P sold off sharply on the news and the Dow plunged by triple digits.
If the dollar is about to get a lot stronger, how should you position?
Instant Insights with the Fast Money traders
Trader Steve Cortes explains that a stronger dollar is good for importers and bad for exporters. Because Cortes also likes companies with strong exposure to North America, he says, “I’d play it long Costco or long Walmart and long the Southern Company.”
If you like the theme, but want a little more torque Joe Terranova likes longApple or longAmazon . “Both are performing well,” he says.
If you’re not a trader but rather a long-term investors who prefers limited risk, Cortes suggests long corporate bonds (which can be played with a long position in the LQD) as a bet that North America-based companies with strong balance sheets and a healthy dividend yield could become the new safe haven.
In this environment, Trader Patty Edwards is primarily bullish on stocks that offer yield. She suggests Bristol-Myers , Johnson & Johnson , Kimberly Clark , and Kinder Morgan .
On a related note, Edwards also suggests putting Nestle and Syngtenta on the radar as two Europe-based companies that appear oversold on Europe concerns.
Trader Brian Kelly can’t get behind anything. “I think we’re heading into a recession with few circuit breakers – I don’t really want to buy anything," he says. "If I had to put money to work it would be in utilities . "
Get more on the key developments happening in the market. Check out our exclusive interview with Larry McDonald, Newedge senior director. Watch the video now!
FINANCIALS REMAIN IN FREEFALL
Financials were still stuck in freefall mode on Tuesday, despite an earlier report by the FT, which said several major U.S. banks had been offered a deal to settle claims of 'robo-signing'
What’s the trade?
Joe Terranova thinks the clock has run out on financials. Now that we’re on the other side of Labor Day he doesn’t think money managers will make a big commitment to the sector. However, if you’re looking for individual names in the space he suggests Wells Fargo, Amex .
Patty Edwards thinks that if you must put money to work in the space, look at Canada-based banks such as Bank of Montreal or Canadian Imperial .
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Trader disclosure: On Sep 6 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Cortes is long Treasuries ; Cortes is long (WMT); Cortes is long (SO); Cortes is short the Euro; Cortes is short Silver; Cortes is short the Aussie Dollar; Cortes is short the Nadsdaq; Edwards is long the Canadian Dollar; Edwards is long (RSW)
For Patty Edwards
Trutina is long (BMO)
Trutina is long (AMZN)
Trutina is long (AAPL)
Trutina is long (JNJ)
Trutina is long (KMB)
Trutina is long (BMY)
Trutina is long (KMP)
Trutina is long (C)
Trutina is long (DNKN)
Trutina is long (GOOG)
Trutina is long (LQD)
Trutina is long (GDX)
Trutina is long (NKE)
Trutina is long (GLD)
Trutina is long (SLV)
Trutina is long (SDS)
For Brian Kelly
Accounts managed by Brian Kelly Capital own (TLT) options
Accounts managed by Brian Kelly Capital own (MON)
Accounts managed by Brian Kelly Capital own (MCP)
Accounts managed by Brian Kelly Capital are short (EWG)
Accounts managed by Brian Kelly Capital are short (FXF) options
Accounts managed by Brian Kelly Capital are short (FXE) options
** No disclosures
CNBC.com with wires.