Credit Crunch Weighs On Market

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CREDIT CRUNCH WEIGHS ON MARKET

The Dow closed lower on Friday as investors grew increasingly nervous about the uncertainty around Lehman Brothers.

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DOWN TO THE WIRE FOR LEHMAN

Shares of Lehman Brothers fell to an almost 14-year low on Friday due to concerns that the investment bank may not find a buyer because the U.S. government is reluctant to provide financial backing. All eyes remain glued to developments with Bank of America widely seen as the top contender.

"Lehman is a proxy for the U.S. markets to some extent," said Jim Fehrenbach, head of Nasdaq trading at Piper Jaffray in Minneapolis. "Where Lehman goes so will the market in the short term."

“My guess is that Lehman will open for business on Monday,” adds Sanford Bernstein analyst Brad Hintz (He's a former CFO of Lehman.) “One of the challenges is doing the due diligence on a $600 billion balance sheet. It’s not an easy job. It’s going to be a difficult thing to get through quickly.”

And according to Hintz Lehman doesn’t have a funding problem. "They have no reason to settle this thing quickly. They can fund themselves,” he says.

That might be a good thing. A lot of people on the Street are telling CNBC’s Charlie Gasparino they don’t think the deal gets done. "Lehman is having a tough time getting a deal done," he says on Fast Money "because they have things on the balance sheet that are tough to value."

And in case you’re looking for a trade Hintz says, ”there’s no reason to jump into the brokers.”

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MATERIALS STRENGTH

The commodities story came back into play on Friday in large part because the dollar was weak.

Commodity prices are down 20% but commodity stocks are down 40%, explains Tim Seymour. There are tremendous values in this space.

I sold my position in the PowerShares DB US Dollar Index Bullish , adds Jeff Macke. It simply rallied too far too fast.

The dollar will probably start to move sideways, adds Joe Terranova. I think that’s all commodities will need to move higher.


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THE VOLATILITY FACTOR

The volatility index started to creep higher on Friday nearing that critical 30-level that Pete Najarian has been waiting for.

The level of volatilty suggests that the market could be on the precipice of a big drop next week, he explains. But that could also be the capitulation we’ve been wating for.

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OIL DIPS BELOW $100

Traders are keeping a close eye on oil futures with Hurricane Ike's bearing down on the Gulf coast.

Ike's eye was forecast to strike somewhere near Galveston late Friday or early Saturday then head inland for Houston, but the sprawling weather system nearly as big as Texas was already buffeting the Gulf Coast and causing flooding in areas still recovering from Labor Day's Hurricane Gustav.

Because of its ominous size, storm surge and flooding were the greatest threats. Should a wall of water come through the shipping channel it could cause $100 billion in damage, explains CNBC’s Scott Cohn on “Fast Money.” If the forecast holds true it could be catastrophic. Certainly, we’d be looking at some serious insurance losses.

Despite the potential for disruptions, I still think the only trade in oil is reformulated gasoline, says Joe Terranova. (More often than not storms pass through without doing serious damage)

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APPLE HITS 5-MONTH LOW

Apple suffered a down week even after it announced a new range of iPod products.

At Apple’s conference, Steve Jobs looked a little thin and that had investors worried about his health. (He’s a cancer survivor.)

It might be tasteless, but his health matters, says Jeff Macke. Apple is all about Steve Jobs.



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Trader disclosure: On Sept 12, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (WMT), (MSFT), (UUP); Macke Is Short (TM); Seymour Owns (AAPL), (F), (GM), (MER), (SHLD), (TSO); Seygem Asset Management Owns (EEM); Najarian Owns (AAPL) And (AAPL) Collar; Najarian Owns (GE) Put Spread; Najarian Owns (HOLX) Calls; Najarian Owns (MS) And Is Short (MS) Calls; Najarian Owns (NOK) And Is Short (NOK) Calls; Najarian Owns (RIMM) Call Spread; Najarian Owns (TSO) Call Spread; Najarian Owns (XLF) And (XLF) Collar; Terranova Owns (AAPL),(RIMM), (GS), (VLO), (SA), (YHOO), (NOV), (POT), (EOG), (FCX), (X); Terranova Owns (AIG) Puts And Owns (AIG)

Terranova Is Chief Alternatives Strategist Of Phoenix Investment Partners, Ltd.; Phoenix Investment Partners Owns More Than 1% Of (ABD), (ARE), (BIG), (BRE), (CNTY), (CNW), (CLB), (OFC), (DLM), (DRH), (DLR), (EPR), (ESS), (EXR), (AGM), (FL), (GBL), (GNET), (IGE), (LNET), (MAC), (OIIM), (PSPT), (DBC), (DBV), (SLB), (GWX), (SSYS), (SKT), (UA), (BIV), (VV), (BLV); Phoenix Investment Partners Owns More Than 1% Of Goldman Sachs Financial Square Fund - Money Market Fund; Phoenix Investment Partners Owns More Than 1% Of Seagate Technology Tax Refund Rights

Terranova Is Co-Portfolio Manager Of The Phoenix Diversifier PHOLIO; Phoenix Diversifier PHOLIO Owns (IGE), (DBC), (DBV)

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