'Fast Money' Recap: Market Angst Over Debt Problems

A big selloff in the Treasurys sent the markets lower Wednesday.

The Dow Jones Industrial Average fell 173.47, or 2.05%, to 8,300.02, while the S&P 500 dropped 17.27, or 1.9%, to 893.06. The Nasdaq lost 19.35, or 1.15%, to 1,731.88.

Melissa Lee, the moderator of CNBC's "Fast Money" TV show, asked the trading panel whether the rally might be derailed by Treasury yields which spiked to new highs over concerns about the government's increasing debt load.

Joe Terranova said investors are frustrated because they are trading in a consolidating market that has moved between 875 and 930 this month. "You have to be surgical in your picks and trading. And right now, if you're bullish, you have to be on the defensive," he said.

Guy Adami said it was a discouraging day and expects the market to head lower.

Steve Grasso said the hedge funds are dictating the action in the markets, with the pension funds and mutual funds sitting on the sidelines.

Pete Najarian said he senses a change in market sentiment from the dramatic decline in volatility.

Lee wondered whether borrowing costs for consumers will head higher and derail the rally. Terranova said it's important to understand that the Chinese are only interested in the front end of the yield curve for the Treasurys: the 2-, 5- and 7-year Treasurys. He said they and other foreign central banks are not interested in taking on 20- to 30-year debt exposure.