'Fast Money' Recap: Supercommittee Trade

NEW YORK ( TheStreet) -- The markets sank again Thursday as eurozone worries widened to Spain and France.

The Dow Jones Industrial Average fell 134.86, or 1.13%, to 11,770.73. The S&P 500 dropped 20.78, or 1.68%, to 1216.13. The Nasdaq lost 51.62, or 1.96%, to 2587.99.

Joe Terranova said on CNBC's "Fast Money" TV show, that there was no place to hide in in a market that was without a catalyst. He doubted whether there would an end-of-the year chase for performance. He said the situation could turn around if there is a surprise from the congressional supercommittee.

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 on TV

Tim Seymour said the market is worn down as the S&P heads to 1200. Guy Adami pinned the blame on escalating European bond yields. Adami said it would be encouraging if the S&P could close above 1225 but he said it's more likely it's heading to 1180.

One casualty of the European debt crisis is Jefferies ( JEF), which was down 5.7% on deepening concerns about the rising yield on its debt and its exposure to European sovereign debt.

Karen Finerman said the debt situation is scary for bondholders and raises questions about the future of the investment banking model.

Jeffery Harte, principal with Sandler O'Neill, said Jefferies is dealing with a situation where there is a lot of market risk aversion. He said the company appears to have enough liquidty ($2.5 billion in reserves) to handle short-term funding needs. He also said it's good to see the Bank of New York Mellon ( BK), recently enter into a partnership with it for clearing services.

Adami said he believes the stock price will go down as European bond yields rise.

Turning to tech, Lee noted reports that Amazon ( AMZN), which was down 3.5% today, that it was going to come up with a smartphone next year.

Gene Munster, an analyst with Piper Jaffray, downplayed the Amazon's chances in the smartphone market, saying that market is far more difficult than the tablet market.

He told the panel that the important metric to watch for in Amazon is revenue. He said it has to deliver on the top line and a key test will come on Cyber Monday.

Finerman praised the addition of Ralph Whitworth, founder of Relational Investors to the board of HP ( HPQ). She said every shareholder should be happy. Adami said the stock has been on a defined downward trend since March and needs to close above $30 before it can move to the upside.

Lee noted that Salesforce.com ( CRM) was down 10.6% after posting a quarterly net loss and rising stock-based compensaton costs. Adami said the stock, which is valued at 71 times forward earnings, needs to "knock the cover off the ball to go higher." Terranova said he would buy the stock if it fell to $110 to $115.

Gap ( GPS) was down after reporting a 36% drop in profits in the third quarter. Seymour said that although Gap is doing well internationally, especially in China, he was disappointed by the results. Finerman found it difficult to understand what Gap represented anymore and thought Children's Place ( PLCE) was a better bet.

Lee brought in Curtis Arledge, CEO of BNY Mellon Investment Management, to comment on the work of the congressional supercommittee to come with a budget-deficit deal.

Arledge said the policymakers are playing a game of chicken and the markets are trying to figure out whether they know it. He also said the Democrats and Republicans feel they have until next year's election to come up with something.

Arledge said the economy is going to worsen if the supercommittee punts. He said stocks will suffer while Treasury bonds will do fine. He said the situation will be bad for risk assets.

Terranova said it may come down to a water-downed solution involving a payroll tax cut and an extension of unemployment benefits. On an optimistic note, Ron Insana said the U.S. is still the "best house in a bad neighborhood for stocks, bonds and any kind of risk asset."

Shifting to the fear trade, with the VIX back in mid-30s, options trader Jim Iuorio said the real fear is France, where the 10-year yields have rallied 105 basis points in the past five to six weeks. He said he is long volatility.

On a day when all commodities had a rough time, Dennis Gartman said it was an ugly session that "took no prisoners." He said there was simply no place to hide in gold, stocks or currencies.

He said the drop in gold might have caused by the sight of tear gas on the streets in Greece and unfounded rumors that the IMF and U.S. might be selling gold. He said the market psychology changed when the euro broke down.

In the auto sector, General Motors ( GM) was down 3.1% and 30% down from its IPO price of $33. Adami thought the better company was Ford, while Mike Khouw said GM is still a well-liked name that has seen a rise in open interest in calls.

Moving on to the currency trade, Robert Savage, CEO of track.com, said the emphasis in today's market is not computer models but risk management. He said it's not about trends or bottom lines as it is about taking defensive steps to avoid "losing your shirt."

He said the biggest fear for the markets is the possibility of a hard landing in China.

Lee said there was a bloodbath in China's Internet search sector. Thus far in November, Dangdang ( DANG) is down 27%; Yoku.com ( YOKU) is off 19%; and Renren ( RENN), is off 39%.

Seymour said the sector that has been under intensive competitive pressures with companies having to live with razor thin margins in their chase for market share, allegations of fraud and valuation issues. He said the one exception has been Baidu ( BIDU), which continues to perform one.

Insana said he wouldn't bother to invest in Chinese stocks because of the lack of transparency.

In the final moves, Seymour liked the iShares MSCI Emerging Markets Index Fund ( EEM). Adami liked Ralcorp ( RAH). Finerman liked CF Industries ( CF) below $140. Terranova favored Aruba Networks ( ARUN).

-- Written by David Tong in San Francisco.

>To contact the writer of this article, click here: David Tong.

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