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Bank of America Could Drop After Stress Tests

It seems all pro traders can talk about this week are the imminent stress test results, and how they could move bank stocks.

The Fed is scheduled to release full results at 4:30p ET on Thursday and we’re hearing the criteria regulators are using are fairly austere.Banks must be well capitalized enough to withstand the following:

Unemployment Rate 13%
Equity Prices Dropping 50%
Housing Prices Dropping 21%
Other Major Economies of the world Contracting

Looking at these very stringent parameters, Fast Money trader Joe Terranova can’t help but wonder if some banks are modeled against a more benign scenario.

He thinks banks most exposed to consumer credit are at greatest risk. “I think the concern has to be squarely on Bank of America,” he says.

Karen Finerman agrees that the risk could be the downside. “How long do the banks have to get into compliance if they’re found capital deficient?” she muses.

Conversely, Terranova thinks capital markets names should emerge as winners after the stress tests. ”It's why I'm long Goldman Sachs,” he says, "They don't have concerns in the consumer loan environment like Bank of America does." (Also Terranova thinks improvements in Europe are bullish for GS.)

The usually bearish Guy Adami is optimistic that the stress test results will buoy banks broadly, and as a result the entire market.

“My sense is that the Street is surprised by how well they do,” he says. “I think the results could power the S&P to 1425.”

Jon Najarian agrees with Adami that largely the stress tests will generate bullish moves. “Watch the XLF ,” he says. “It’s up 22% since the beginning of the year. People aren’t worried about the end of the world.”





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Trader disclosure: On March 12, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Terranova is long VRTS; Terranova is long NXPI; Terranova is long IBM; Terranova is long MCD; Terranova is long EMC; Terranova is long MSFT; Terranova is long GS; Terranova is long JOY; Terranova is long OXY; Terranova is long LQD; Terranova is short GOOG; Terranova is short April Gold futures; Terranova is short May Silver futures; Adami is long C; Adami is long GS; Adami is long INTC; Adami is long AGU; Adami is long NUE; Adami is long BTU; Najarian is long AAPL call spreads; Najarian is long GS call spreads; Najarian is long IBM call spreads; Najarian is long WNR call spreads; Najarian is long RIG call spreads; Najarian is long WDC call spreads; Najarian is long CCL call spreads; Najarian is long HTZ call spreads; Nations is long C; Nations is long BAC

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