'Fast Money' Recap: Investor Confidence Crushed

The trading panel said today's frightening trading glitch impaired investor confidence in the markets.
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NEW YORK (

TheStreet

) -- The markets sank on a wave of selling Thursday on eurozone debt fears and a trading glitch.

The

Dow Jones Industrial Average

sank 347.80, or 3.20%, to 10,520.32, while the

S&P 500

dropped 37.75, or 3.24%, to 1,128.15. The

Nasdaq

lost 82.65, or 3.44%, to 2,319.64.

Gary Kaminsky said on

CNBC

's "Fast Money" TV show that the market selloff had a lot to do with the events in Europe. He said what is happening there is a "global problem" that is affecting the cost of capital and credit markets.

He said the ability of governments to take care of bad assets from the financial sectors is "in jeopardy."

For a breakout of some stocks from a recent "Fast Money" TV show,check out Dan Fitzpatrick's "3 Stocks I Saw on TV."

3 Stocks I Saw onTV

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Guy Adami said the big spike in volatility, the plummeting euro and the drop in the Dow by more than 1,000 points during the trading session are all signs that point to a continuation of the selloff.

Melissa Lee, the moderator of the show, turned the panel's attention to one of the causes for the rapid decline in the market: a computer trading glitch that many reports attributed to a Citigroup trader who put in a 15 billion futures sell order instead of one for 15 million. Citigroup said it was looking into the matter.

The glitch reportedly sent

Procter &Gamble

(PG) - Get Report

plunging from $60 to below $40.

Adami said the scary episode quashed what little confidence the retail investor has in the markets. Kaminsky agreed, saying that today's events is going to "kill" the recent steps to restore market credibility.

Pete Najarian said investors could have protected themselves by buying puts in this situation. "That's why options are important," he stressed.

Steve Grasso said the glitch emphasized the need for the human element in trading. He said human traders are in a much better position to slow trading that machine-driven trading.

Anthony Scaramucci agreed. He said the glitch pointed out to need for financial reforms to deal with "gaps in volatility." He said the current suggestion to remove banks from the system would remove an important source of capital and expose the retail investors to further risk.

Scaramucci called the glitch the "second bomb that didn't go off in Times Square." He said it was frightening to see how a "system" or "key punch" error can hammer three stocks and affect the entire world.

Lee mentioned that Steve Cortes had noted a drop in the yen before the big drop in the market.

Lee brought in Dennis Gartman to comment on the unraveling events in Europe. Gartman said the eurozone is going through the process of its own demise. "It will take several years" and it's "the beginning of the end for the euro," he said.

Gartman advised investors to "get small, be less involved and go to the sidelines."

Adami said investors are pouring money into the gold market. Finerman said she bought some shares of

Hewlett-Packard

(HPQ) - Get Report

and

TJX

(TJX) - Get Report

today.

Kaminsky said he was already seen the impact of the market demise on M&A and IPOs, with the cancellation of three deals today.

Jon Najarian warned that high-frequency computerized trading had reached a dangerous point where trades are simply coming in "too fast" to handle. He said something has to be done to slow down this kind of trading.

Pete Najarian said the market volatility levels hit 40 for the first time this year and will be tested again at those levels.

Mark Fisher, of MBF Clearing, said the rapid market selloff felt as if a "nuclear bomb" had gone off. He said humans can't keep up with the speed of computerized trading at this level, and he predicted it could happen again if the process isn't slowed down.

Fisher said it would be advisable for a bunch of traders and academia to come up with a solution to the problem. He said the CFTC needs to be proactive in finding a solution.

Kaminsky said price discovery is going to a big problem in the coming days.

Lee brought in Terranova to talk about the gold trade. Terranova said the flight to the commodity was in evidence today. He also said he bought some oil.

In the final trades, Kaminsky told investors to "get small," while Adami predicted a bigger selloff ahead. Finerman liked Hewlett-Packard. Najarian said investors should draw a list of buying opportunities.

-- Written by David Tong in San Francisco

To watch replays of Cramer's video segments, visit the Mad Money page onCNBC

.

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"'Fast Money'Portfolios of the Week" on Stockpickr every Thursday.

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