NEW YORK (TheStreet) -- The S&P 500 slid 0.47% while the Russell 2000 tumbled 1.62%.
On CNBC's "Fast Money" TV show, Brian Kelly, founder of Brian Kelly Capital, said investors are beginning to divide into two groups: One group says the economy is improving and bond yields are going higher while the other group argues the economy is not improving fast enough, therefore bond yields are going lower.
Kelly expects yields to fall. He said it all comes down to one question: "How strong is the economy?"
Guy Adami, managing director of stockmonster.com, said the economy doesn't appear as strong as many investors once thought. He agreed bond yields are going to go lower and he has stood behind this thesis for many months on Fast Money.
Jon Najarian, co-founder of optionmonster.com and trademonster.com, said consumers have not been as strong as many investors had hoped, meaning they need interest rates to stay low and possibly go lower. The selloff in equities helped bonds rally on Wednesday as well, he added.
Cisco Systems (CSCO) reported better-than-expected earnings results and guidance. Adami called it a "solid quarter" and said the stock looks likely to retest its 52-week high near $26.50.
Kelly agreed, saying he is a buyer. He argued that investors will pile into the stock because of its valuation and revenue growth -- albeit, slow revenue growth.
Najarian suggested that investors were pleased by CEO John Chambers' comments regarding the company's embracement of software-defining networking.
Kelly told investors to avoid SeaWorld Entertainment (SEAS). He called the earnings report "not great" and said the company has publicity issues. For those who want exposure to theme parks, buy Disney (DIS).
Michael Novogratz, director and principal of Fortress Investment Group (FIG), was a guest on the show. He said the market has been very hard to trade, with the S&P 500 and Treasury yields remaining in such a tight trading range. He suggested investors keep positions small until a trend emerges.
Novogratz reasoned here is no credit bubble forming -- bubbles usually gets started from over-leveraged banks. This is not the case. He said the rising bond market suggests the economy is not improving as fast as many economists had previously thought. He concluded that momentum stocks will have renewed life sometime in 2014 and M&A activity should remain strong.