The uncertain fate of the Big Three automakers and more distressing signs of a weakening economy weighed on Wall Street Thursday as stocks retreated after two days of gains.
Dow Jones Industrial Average
slumped 215.45, or 2.5%, to 8376.24, while the
fell 25.52, or 2.9%, to 845.22. The
was off 46.82, or 3.1%, to 1445.56.
The trading panel on CNBC's "Fast Money" TV show offered various reasons for the market's demise. Dylan Ratigan noted the 16% drop in shares of
late in the session was a big factor.
Tim Seymour said the European economy looks worst than expected, where the central banks of England and Sweden cut rates.
Seymour also attributed the market drop to the forced selling of hedge funds.
With every asset shrinking in value, "maybe you should be in gold until opportunities" materialize next year, Ratigan said.
Guy Adami questioned that strategy, noting the price action on gold has drifted downward to the point where there's just half the number of speculators in the commodity now than there were when the price was $1,000.
Jeff Macke said his trading strategy these days is simply to "hide in cash" and "engage in opportunistic trades." Make "small and fast moves, take your gains and deal with the taxes," he said.
Ratigan asked Pete Najarian whether oil would be a good investment opportunity at $47. Of the big energy names, Najarian liked
the most because of its "multiple exposure through natural gas, oil and refineries." But he sounded a cautionary note, saying he didn't like any of the energy names in a situation there is a "flat bottom."
Najarian instead reiterated his preference for
Ultra Financials ProShares
as a smart way to play the financials as a group instead of picking specific companies.
Adami said he liked
, which he believes will be profitable next year. "This is the time to buy it."
Najarian also liked
. "It was up today. You got to like it when it moves against bad news," he said.
Ratigan shifted the discussion to the impact of job loss on the markets and economy and asked Mike Darda, chief economist for MKM Partners, to comment on Friday's jobless report..
Darda said his firm's forecast is predicting a loss of 500,000 jobs in November, which would be "significantly worst" than the consensus expectations of a loss of 350,000.
For the fourth quarter, the economy is collapsing at a 4% to 5% annual rate. "We haven't seen anything like that since the early 1980s," he said.
Darda doesn't think the economy will bottom until the fall of 2009, at the earliest. "That means a few more months of a sloppy market," he said.
The economist said it's going to take some time for the imbalances to wind. In this adverse climate, he said, investors have to be defensive in their sector selection and what they do with their money.
Ratigan asked Zachary Karabell to comment on infrastructure spending under an Obama administration. Karabell said the proposed plan to spend $500 billion on infrastructure spending will lead to a wave of construction projects and the creation of 2.5 million jobs. All this spending, he said, will lead to increased consumer spending.
From a trading standpoint, he said, investors should invest in headlines, such as alternative energy stocks when green projects are announced. In addition, he sees investment opportunities in regional banks and retailers which stand to benefit from higher consumer spending.
Seymour said the same spike in spending should occur when home buying picks up when the federal subsidy programs start to take hold.
At the close of the show, Melissa Lee was asked to comment on the volatile impact hedge-fund redemptions are having on the market. She noted an estimated $200 billion worth of redemptions still have to be made between now and the end of this year.
She noted hedge funds are hurting badly to the point where they have "gated" investors from making withdrawals. According to
, over 80 hedge fund managers have limited withdrawals in the past two months.
She said the hedge fund selling is not limited to equities, but is across the board, including commodities, where "they are big players."
This article was written by a staff member of TheStreet.com.