The stock market plunged on Thursday as investors now are coming to the realization that the economy is in a recession. The Dow closed down 306 points and the NASDAQ fell 47 points. The crew at CNBC's "Fast Money" discussed the generally dismal state of the market and then tried to find potentially profitable trades for inveators.

Jeff Macke thinks Thursday was the begging of fear for the markets. Guy Adami now feels that market is getting close to capitulation. Karen Finerman agreed with Adami. Pete Najarian says fear is back, but we won't be at a panic until the CBOE Volatility Index reaches 30. He feels once the panic comes in, market players will get comfortable with buying stocks again.

Volatility on the Rise

Volatility is rising and the "Fast Money" traders put together some stock ideas that can make you money off the wild swings. Najarian says look at Charles Schwab ( SCHW), TD Ameritrade ( AMTD) and Knight Capital ( NITE). He likes all three stocks as long as the overall stock market doesn't decline for more than a few months. Adami favors Goldman Sachs Group ( GS) which he doesn't think will have big problems with write-downs as others in the sector have. He thinks Goldman's next quarter will be great.

(Here's a professionally managed portfolio that addresses volatility on SEI Managed Volatility Fund.)

Business Empire Strategy

On Thursday two key economic indicators were released the results weren't pretty. The rate of new home starts fell 14% and the Philly manufacturing index fell to its lowest levels in six years. Adami thinks the U.S. is in a recession, but investors can still make money buying business empire stocks. Empire stocks represent diversified conglomerate companies that sell products and tools to developing countries. Adami likes Danaher ( DHR) which trades at P/E of 20. He feels DHR is well insulated from an economic slowdown. Finerman thinks DHR is getting attractive at current levels.

Adami also likes Honeywell ( HON) which trades at P/E of 17. He pointed out that HON has outperformed the overall market in the last 4 out of 6 recessions. According to Adami, a few more to look at are 3M Company ( MMM), General Electric ( GE) and Illinois Tool Works ( ITW). Finerman also suggested looking at United Technologies ( UTX) which has a big aerospace and HVAC business.

Beaten up Stocks on the Pro's Radar

The "Fast Money" traders highlighted four stocks that have caught their attention the most in this falling market. These four stocks have come down enough in price that the crew thinks they warrant a look. Adami says keep an eye on BorgWarner ( BWA) which traded up 7% Thursday after the firm reported a strong 2008 profit forecast. He thinks BWA is positioned to take global market share. Finerman mentioned that Macy's ( M) is interesting at current levels. She was surprised that the stock wasn't down on Thursday and that might indicate it is done trading lower.

Macke highlighted Under Armour ( UA) which traded lower Thursday off of rumors the company was going to advertise during the Super Bowl. He says UA is yesterday's darling trading at today's prices. Najarian thinks it's time to buy the oil refiners. He says he is getting close to buying Tesoro ( TSO) and Valero ( VLO).

(This is one version of a portfolio of undervalued stocks on Tru Empire Investment Value Fund.)

Drug Studies

Investors are worried about big pharmaceutical firms that sell antidepressants and cholesterol drugs after some studies came out that questioned the effectiveness of some of those drugs. One study from the New England Journal of Medicine questioned the effectiveness of some of the antidepressant drugs. Pfizer ( PFE) and Wyeth ( WYE) took a hit Thursday off that study.

Jon Najarian explained that Merrill Lynch took Merck ( MRK) off of its "focus 1" list on Thursday. He also explained that Schering-Plough ( SGP) and Merck were hit with a class action lawsuit and that weighed on the stocks. Najarian is seeing massive put buying activity in both names. He thinks these stocks have a lot more room to the downside. Adami mentioned he likes Johnson & Johnson ( JNJ) going into earnings. Macke mentioned he would add to positions in Pfizer and Wyeth on the dips.

Hotel & Casino Trade

Hotel and casino stocks have been under heavy selling pressure since the start of 2008. Dylan Ratigan highlighted that Starwood ( HOT) is down 13%, Wyndham ( WYN) is down 9%, Las Vegas Sands ( LVS) is down 27% and Wynn Resorts ( WYNN) is down 13%. Finerman wouldn't get long or short the hotel stocks. Finerman disclosed that she shorted Harrah's Entertainment ( HET) on Thursday because she feels the casino operator will not be able to close a $17.1 billion buyout from a private equity group.

Macke thinks the hotel stocks are beginning to be priced for a recession and they won't be safe haven stocks to hide in. Najarian mentioned that the only casino stock worth looking at is MGM ( MGM) because Dubai has a stake in it.

Word on the Street

Merrill Lynch ( MER) fell 10% after the investment bank reported its worst quarterly results in the firm's history. Najarian thinks there's more downside to come to the financials. He disclosed that he bought a put spread on Lehman Brothers Holdings ( LEH) Thursday.

IBM ( IBM) reported forth-quarter profits that rose 12%, beating Wall Street estimates. The stock traded up 5% after hours on the news. Macke thinks the IBM news will help stocks to open higher Friday morning. He mentioned he would sell into any higher open in the morning.

Goldman Sachs added Microsoft ( MSFT) to their "Conviction Buy List" Thursday. Adami predicts MSFT will report solid earnings next Thursday and trade up to $35-$36.

Dennis Gartman, author of The Gartman Letter emailed the "Fast Money" traders and disclosed he covered his short positions in the luxury retailers, sold stock futures and bought gold throughout the balance of the day Thursday.

Pops & Drops

Pops - eBay ( EBAY) traded up 1% after Bear Stearns upgraded the online auction firm. Macke wouldn't advise taking the gains because a 1% pop isn't much.

BlackRock ( BLK) traded up 1% after profits nearly doubled for the asset manager. Finerman explained that earnings were nice due to hedge fund fees.

Boston Scientific ( BSX) traded up 2% after the stent maker received an upgrade from Morgan Stanley. Najarian thinks BSX looks okay, but he likes Johnson & Johnson ( JNJ) much better.

Urban Outfitters ( URBN) traded up 1% after a Citigroup analyst made some bullish comments on the specialty retailer. Macke remarked that URBN is another specialty retailer that has been hammered.

LDK Solar ( LDK) traded up 4% after the Chinese solar company signed a 10-year deal to supply wafers to Taiwan-based Neo Solar Power. Najarian pointed out that on a day like Thursday that is a huge win for LDK.

Drops - Freeport McMoRan ( FCX) fell 8% as investors got out of commodity stocks due to recession fears. Adami recommends buying FCX on Friday.

American International Group ( AIG) fell 6%. Finerman explained that insurance is out of favor right now.

Harley Davidson ( HOG) fell 7% after Citigroup downgraded the motorcycle maker from sell to hold. Macke remarked that the shorts are finally getting paid on HOG.

Perini Corp ( PCR) plunged 27% after the developer of its Las Vegas project received a loan default notice. Najarian suggests PCR has some issues.

Alliance Data Systems ( ADS) fell 16% after rumors hit Wall Street that Blackstone might back out of a deal to buy ADS. Finerman wouldn't step in here on ADS.

PNC Financial ( PNC) fell 7% after the bank reported a 53% drop in profits due to losses from real estate loans. Adami predicts PNC will fall to $49.


Viewers send in market questions that they would like answered.

William wants to know, "Will other major banks cut dividends like Citigroup ( C) did?" Macke believes that other banks will also have to cut dividends in this tough environment for financials.

Andrew writes, "Over the past week you have talked about Blackstone ( BX). With a 4% hit Thursday, is now the time to buy?" Adami likes BX for a buy at current levels.

A viewer asks, "Does it seem likely that Citadel will buy E*Trade ( ETFC)?" Najarian thinks it would make sense for Citadel to buy ETFC, but he also feels that TD Ameritrade ( AMTD) and Schwab ( SCHW) might take a shot at buying out ETFC.

Final Trade

Macke, Finerman and Adami all advised buying the market if it gaps significantly lower at the open Friday morning. However, Najarian didn't agree.
Stockpickr is a wholly owned subsidiary of