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Are Markets Saying the Second Half Will Stink?

On Thursday investors again ran for the exits amid chatter the economic recovery had either slowed considerably or stalled out all together.

This time, the offending economic data came in the form of factory activity in the U.S. Mid-Atlantic region which plummeted in August, falling to the lowest level since March 2009. To make matters worse, existing home sales unexpectedly dropped in July.

Jittery investors sent the S&P sharply lower and pushed the Dow down well over 400 points by mid-session.

Is the sell-off a sign that the second half will stink?

For insights, the Fast Money market pros turned attention to Treasury yields which plunged again on Thursday.

10yearTreasuryYeild-081811.jpg

In the Fast Money chart of the day to your left, courtesy of John Roque of WJB Capital Group, you can see the 10 year Treasury yield going back to 1800.

And with Thursday’s touch below 2 percent, the Street found itself looking at the lowest print since at least 1945.

”The bond market has been trying to tell you something for a while,” says trader Guy Adami.

But what?

It may sound ridiculously simplistic, but strength in bonds is a sign of skepticism in riskier assets such as stocks.

Now why?

According to top strategist Peter Boockvar as the economy contracts both in the US and abroad “earnings will start to reflect (the weakness).” In other words, companies won't generate as much revenue and the bottom line will suffer.

“And investors need to deal with that reality,” Boockvar adds. “Estimates are going to come down.”

Trader Guy Adami agrees. ”People don’t want to hear it,” he says. But at some point you have to face the music. “I think the sell-off is a sign that the market is finally catching up to it.”

Trader Zach Karabell isn’t quite buying what Adami, and Boockvar are selling. “If you think the whole global economy is going down then corporate earnings are at risk,” he concedes, but Karabell doesn’t see it.

”I still think BRIC nations remain strong – there's no reason the earnings picture can't to surprise on the upside, especially for industrials and technology.”

What do you think? We want to know!

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Trader disclosure: On Aug 18, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU); Karabell owns (AAPL); Karabell owns (GOOG); Karabell owns (GS); Karabell owns (IBM); Edwards owns (PM); Edwards owns (FXC); Edwards owns (XLK); Steve Grasso owns (AMD); Steve Grasso owns (ASTM); Steve Grasso owns (BA); Steve Grasso owns (BAC); Steve Grasso owns (C); Steve Grasso owns (D); Steve Grasso owns (JPM); Steve Grasso owns (LIT); Steve Grasso owns (LPX); Steve Grasso owns (LVS); Steve Grasso owns (MAR); Steve Grasso owns (MHY); Steve Grasso owns (NDAQ); Steve Grasso owns (PFE); Steve Grasso owns (PRST); Steve Grasso owns (UAL); Steve Grasso owns (XHB); Steve Grasso owns (XLB); Steve Grasso owns (XLI); Najarian owns (CSTR) call spreads; Najarian owns (TGT) call spreads; Najarian owns (GLD) call spreads; Najarian owns (WFC) call spreads

For Zach Karabell
Rivertwice Capital owns (IBM)
Rivertwice Capital owns (TGT)
Rivertwice Capital is short (GLD)
Rivertwice Capital is short (XLF)

For Patty Edwards
Trutina Financial owns (GOOG) For Clients
Trutina Financial owns (AMZN) For Clients
Trutina Financial owns (AAPL) For Clients
Trutina Financial owns (C) For Clients
Trutina Financial owns (EBAY) For Clients
Trutina Financial owns (MSFT) For Clients
Trutina Financial owns (GLD) For Clients
Trutina Financial owns (SLV) For Clients
Trutina Financial owns (PGM) For Clients
Trutina Financial owns (PM) For Clients
Trutina Financial owns (BMO) For Clients

For Steve Grasso
Stuart Frankel & Co and its partners own (AAPL)
Stuart Frankel & Co and its partners own (CSCO)
Stuart Frankel & Co and its partners own (CUBA)
Stuart Frankel & Co and its partners own (GERN)
Stuart Frankel & Co and its partners own (HPQ)
Stuart Frankel & Co and its partners own (HSPO)
Stuart Frankel & Co and its partners own (MET)
Stuart Frankel & Co and its partners own (MSFT)
Stuart Frankel & Co and its partners own (YHOO)
Stuart Frankel & Co and its partners own (RHT)
Stuart Frankel & Co and its partners own (MET)
Stuart Frankel & Co and its partners own (MU)
Stuart Frankel & Co and its partners own (NYX)
Stuart Frankel & Co and its partners own (PFE)
Stuart Frankel & Co and its partners own (PRST)
Stuart Frankel & Co and its partners own (SDS)
Stuart Frankel & Co and its partners own (UAL)
Stuart Frankel & Co and its partners own (XRX)
Stuart Frankel & Co and its partners are short (QQQQ)


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