After an 8% rise in only two weeks, the bulls couldn't drive the market any higher on Friday.
By the close both the S&P 500 as well as the Dow had made sharp moves lower.
Among the negative catalysts; a measure of consumer sentiment weakened in early July to its lowest in 11 months.
However, if that's the reason you're selling - Jon Najarian says you've got it all wrong.
What must you know?
Instant Insights with the Fast Money traders
Ignore the sentiment index, says Jon Najarian. Whirlpool and Delta Airlines are a much better barometer of consumer sentiment than some Thomson Reuters/University of Michigan index. Those earnings will tell you what business and consumers are doing.
I don't love using the consumer sentiment index as an indicator because it doesn't actually measure production, but I can't ignore it made a dramatic move lower, adds Karen Finerman. It can be a self-fulfilling prophecy if people think things are bad, they don't spend and then things actually get bad.
For me the real tell next week will be earnings from Goldman Sachs, says Guy Adami. Given the numbers out of JPMorgan , BofA and more I can’t believe they have a great quarter. Looking at broader market, I expect more downside lies ahead.
I think Goldman comes out and beats by at least a buck, counters Jon Najarian. As for the broad market, it’s worth noting that we did not see a whoosh to the downside, he says. I'm not making excuses for the bulls but if bears were in control we would have seen selling accelerate into the close.
It's also worth noting that we’ve had freakishly low volume, says Tim Seymour, especially for an expirations day. Personally, I’m seeing risk being pulled back.
BANK OF AMERICA LEAD FINANCIAL CRUSH
As we mentioned above, bank earnings provided the fundamental catalyst for Friday’s sell-off.
After hearing results from Citi and Bank of America on Friday and JPMorgan on Thursday, investors largely felt there was more bad news than good.
Though the banks beat expectations, their reports largely offered a sobering view of both the economy and the health of consumers.
What's the takeaway?
The results out of Bank of America were extremely disappointing. Althoough credit quality improved at BofA the firm showed anemic loan growth. That says to me there’s no demand for loans and that’s not a good thing for the economy.
Good point, it doesn’t matter how steep the yield curve is if banks aren’t lending money, adds Guy adami.
The data out of the banks just adds to my concerns that the consumer is not in good shape, says Patty Edwards.
TOPPING THE TAPE: GOLDMAN SACHS
While the rest of the financial sector was seeing big losses, Goldman Sachs traded sharply higher following its settlement with the SEC.
As you might remember on Thursday’s Fast Money Sanford analyst Brad Hintz told us, in the wake of the settlement Goldman was a $200 stock.
”This is a good company that can generate ROE’s of 17% or 18% (even) under Volcker,” he said.
What should you make of it?
At the end of the day when the dust settles Goldman should emerge as a premiere business and trade at a significantly higher multiple than they do now, says Whitney Tilson of T2. But my time frame is 1 to 2 years.
BP PLUGGED LEAK
Despite announcing that no more oil is currently flowing into the Gulf, shares of BP traded sharply lower Friday.
What’s the trade?
I’m holding my BP position and feeling good about it, says Whitney Tilson of T2. The next thing to watch is BP’s earnings release, which I think will surprise to the upside.
Hear more from Whitney Tilson, Watch the video now!
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Trader disclosure: On July 16, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour owns (AAPL), (BAC), (GE), (MON), (POT), (VALE); Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Finerman owns (AAPL); Finerman’s firm owns (BAC); Finerman owns (BAC) and (BAC) preferred; Finerman’s firm owns (BP) calls; Finerman’s firm owns (JPM); Finerman owns (JPM); Finerman’s firm owns (SPX) puts; Finerman’s firm is short (IJR); Finerman’s firm is short (MDY); Finerman’s firm is short (SPY); Finerman’s firm is short (IWM); Jon Najarian owns (GS) put spreads
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