'Fast Money' Recap: Financial Follies

Stocks in New York ended a mixed day on the downside, as enthusiasm for the Fed's efforts to stem the liquidity crisis waned, and oil prices hit record highs. The Dow lost 0.4%, the S&P 500 fell 0.9% and the Nasdaq ticked down 0.5%.

On CNBC's "Fast Money" TV show, Karen Finerman said the day started out nice overseas in Australia and Europe, but everything started rolling over. She pointed out concerns about liquidity troubles in Bear Stearns (BSC Quote) and other financials.

Pete Najarian said that the Fed's action yesterday was different from rate cuts because it did supply liquidity to the market, which freed people to trade. However, he said that trading doesn't mean economic troubles are over. He reminded viewers of a Deutsche Bank analyst's statement today that if the credit crisis were a baseball game, it'd be in the seventh inning.

Tim Seymour argued that credit risk has not been priced into the market, and that there hasn't been a high-volume capitulation.

Adami said the true test of the market will come tomorrow. He predicted either a collapse in stocks or a rally. He said that sectors that have been working continue to produce, and pointed to Burlington Northern Santa Fe (BNI Quote) and DuPont (DD Quote) as stocks to look at.

The traders took a look at oil's record rise, and charted it against the euro's rise. Tim Seymour said that an oil trade is a currency trade right now.

Najarian said that other commodities, such as grains, are also hitting record levels. He suggested taking profits in Burlington Northern and wait for a pullback. He noted that the Financial Select SPDR(XLF Quote) is up 10% in two days, and urged viewers to take profits.

Finerman said things are looking ugly in the banks. She argued that risk has been repriced and said the major issues in the banks were the size and duration of the writedowns. She said it would be hard to go short the financials in front of a likely Fed rate cut.

Seymour disagreed, saying that he didn't see markdowns in triple-A rated paper and that there was a significant amount of delinquent subprime mortgages behind it.

Adami cautioned viewers not to short the financials or they will get run over. He suggested buying US Bancorp (USB Quote). Bear Stearns notwithstanding, there are banks that are attractive here, he said.

Finerman said Bear's price action has been horrific and she wouldn't be long the company. Seymour said that he believed the rally in financials was only short-covering.

Najarian pointed out that Bear CEO Alan Schwartz was comfortable with the company's forecast earnings range. He said to watch as Bear, Lehman Brothers (LEH Quote) and Goldman Sachs (GS Quote) report earnings. He said he was inspired by Schwartz's words but sensed nervousness in the stock.

On news that Target (TGT Quote) had sold half of its credit card receivables, Finerman said it would be nice to know if the company sold the good half or the bad half. A rally in specialized retail indicates that the consumer is injured but not dead.

Adami said that MasterCard (MA Quote), which he called a huge international growth story, is the way to play specialty retail. Najarian said he would buy Visa on its upcoming IPO.

Southwest Airlines (LUV Quote), which does not have a history of mechanical issues, had to ground a number of its planes today. Seymour said that this news was a Boeing (BA Quote) and Airbus trade.

Adami pointed out that this was an indication of an upcoming upgrade cycle in the airlines. He suggested Rockwell Collins (COL Quote) as a play on the trend. He said it was cheap at 12.5 times forward earnings.