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Dow Clobbered 3%

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DOW CLOBBERED BY 3% AS CITI PLUNGES

The S&P 500 , Nasdaq and Dow all tumbled on Wednesday due to worries about steeper losses at banks worldwide and as U.S. retail sales data pointed to a deepening recession.

All 30 Dow stocks were in the red, including Citigroup . The bank shed more than 23 percent as investors and analysts worried whether the bank can be profitable as it unravels its business model. It is expected to post a multibillion-dollar loss this week.

Analysts speculate that Citi's decision to sell Smith Barney is a precursor to a break-up of the entire firm and that the bank must be urgently seeking to replenish capital due to mounting losses.

"There is an awful lot of uncertainty out there about how severe the economic downturn will be and whether there will be a second round of asset write-downs," says Lincoln Anderson, managing director and chief investment officer at LPL Financial.

Citigroup is due to report its results on Friday, after moving up the reporting date.

Meanwhile, fears about the banking sector were exacerbated after Morgan Stanley analysts forecast HSBC, Europe's biggest bank, is likely to halve its dividend and may need to raise up to $30 billion of capital, while Germany's Deutsche Bank said it lost more than $6 billion last quarter.

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OIL DROPS ON INVENTORY JUMP

Oil fell on Wednesday due to rising inventories and flagging demand in top consumer nations such as the United States.

U.S. distillate demand fell to the lowest level in five years as the economic recession battered industrial consumption, according to the Energy Information Administration.

I’d sell the refiners, counsels Tim Seymour. And I sell DryShips too.

If you look at gasoline it closed up, reminds Guy Adami To me that means people are comfortably short on the bottom.

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DOLLAR HIGHER AS GLOBAL MARKETS CRUNCHED

The dollar edged down from a one-month high against the euro on Wednesday but remained supported as investors braced for a possible interest rate cut by the European Central Bank later in the week.

The ECB is expected to cut rates by 50 basis points from the current 2.5 percent at a policy meeting on Thursday to help fight a broad economic downturn

If the ECB cuts any less it should be a huge boon for the dollar, muses Tim Seymour.




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Trader disclosure: On Jan. 14th, 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 (TM), (DIS), (MSFT), (SDS), (AAPL); Adami Owns (AGU), (C), (BTU), (GS), (INTC), (MSFT), NUE); Seymour Owns (BAC), (EEM), (F), (TSO), (AAPL); Najarian Owns (HSBC), (MSFT), (MS), (CSCO), (XME); Najarian Owns (DNA) Calls, (NVLS) Calls, (NVDA) Calls; Najarian Owns (C) Puts; Najarian Owns (CSCO) Short Calls; Najarian Owns (MS) Short Calls

CNBC.com with wires