The Dow fell for the second day on Thursday after Standard & Poor's threatened to strip General Electric of its 'AAA' credit rating and slumping oil prices crippled energy shares.
Meanwhile, Chevron and Exxon Mobil were the biggest drags on the Dow for the second consecutive session as oil fell almost $4, or about 10 percent, to settle near $36 a barrel on growing fears of falling demand.
Also, investors continued to assess the benefit of the Fed's record rate cut on Tuesday and a proposed stimulus package from President-elect Barack Obama.
And the White House said it was nearing a conclusion on the bailout package that Detroit's Big Three automakers are seeking, even considering an "orderly" bankruptcy, as they struggle to cope with slumping demand and weakening consumer spending.
Strategy Session with the Fast Money Traders
Over the last couple days I think we’ve seen a technical correction, says Joe Terranova. Nothing more.
The last 10 trading days have been commodities driven, adds Pete Najarian. The selloff isn’t just about GE.
I like that the Fed is doing everything possible to get everyone lending, adds Karen Finerman.
S&P CUTS GE TO OUTLOOK ‘NEGATIVE’
Standard & Poor's on Thursday changed its outlook on General Electric and its finance arm to negative, and said there is at least a one-in-three chance it will cut GE's credit rating from the top 'AAA' in the next two years.
"The negative outlook is based partly on the concerns regarding General Electric Capital's future performance and funding," S&P said in a statement.
"In addition, fundamentals-based earnings and cash flow could decline sufficiently during the next two years to warrant a downgrade,' the rating agency said. 'We will continue to monitor GECC's success in executing on its funding and liquidity plans in light of capital market turmoil."
GE Capital—which finances businesses ranging from investing in commercial real estate, to financing inventory at appliance retailers, to offering store credit cards—is facing the risk of rising delinquencies due to a slowing economy.
The credit rating agencies after being kind of asleep at the switch are now being a little too aggressive, muses Karen Finerman.
It seems to me that ratings agencies are late, adds Guy Adami. They might be right but they’re late. If you’re looking for a play look at Honeywell .
OIL DIPS BELOW $36 INTRADAY
U.S. crude prices dropped more than 9 percent to $36 a barrel on Thursday as slumping demand and swelling U.S. inventories offset OPEC's record supply cut agreement.
"Following OPEC's announcement to cut so aggressively, market participants are (assessing) the degree of this move as being indicative of just how weak demand is globally for crude oil," says Chris Jarvis, senior analyst at Caprock Risk Management.
Ultimately I think oil is heading lower, counsels Joe Terranova. If the dollar recovers we’ll probably go below $30.
KEY STOCKS FACING RESISTANCE.
Key stocks such as Morgan Stanley , Google , MGM, and ConocoPhilips are all breaking down at their 50 Day Moving Average.