NEW YORK (TheStreet) -- Volatility in the bond market may be starting to finally concern equity investors. The S&P 500 dropped nearly 1% Thursday. European bonds are becoming increasingly more volatile, Tim Seymour, managing partner of Triogem Asset Management, said on CNBC's "Fast Money" TV show.
Seymour said that while higher interest rates aren't necessarily a bad thing for all stocks, it is certainly negative news for select sectors. He said a strong labor report on Friday could send stocks lower because investors anticipate the Federal Reserve will then increase interest rates sooner than expected.
Brian Kelly agreed, but also agrees with the International Monetary Fund, which believes the Federal Reserve should postpone an interest rate hike until 2016. Kelly, the founder of Brian Kelly Capital, explained IMF chief Christine LaGarde's comments were initially well-received by investors until they realized it likely means the IMF doesn't view the economy as strong enough to justify higher rates. Ultimately, that pushed stocks lower on Thursday.
Dan Nathan, co-founder and editor of riskreversal.com, is looking for a pullback of "significant manner" but acknowledged he's unsure if now is that time. While investors aren't showing a ton of fear, a 5% to 10% decline could be in the cards.
Some investors are starting to think about the possibilities of a decline, said Jon Najarian, co-founder of optionmonster.com and trademonster.com. He pointed out that the CBOE Volatility Index (VIX.X) climbed 7.7% and there have been noticeably large buyers of call buyers in the index.
Many investors use the VIX as a hedge against their long positions. Hedging now before a big decline is a good idea, according to Raoul Pal, publisher of the Global Macro Investor. He argued that the U.S. economy is on the verge of entering a recession and the declining ISM data is a key piece to it.
Almost all other indicators are suggesting a recession is near, he explained. While the ISM is in the low 50s, he said that a drop to 50 could warrant a decline of almost 20% in the S&P 500. If the ISM drops to 46, there's an 85% chance of a recession, he warned.
Pal says investors should "be very cautious" on U.S. stocks and he also stated that oil prices are headed lower due to oversupply and a strong U.S. dollar. Conversely, he still likes Japanese equities, in particular Japanese banks. Pal said the yen seems poised to decline.
Shares of Twitter (TWTR) declined 0.8% on Thursday and are now down more than 30% from the recent high near $53. Ken Sena, managing director at Evercore ISI, recently downgraded the stock to hold and assigned a $40 price target. Currently, Facebook (FB) is simply doing a better job and is far more attractive to advertisers, he said. Twitter doesn't have the reach or the engagement necessary to do as good of a job, which makes it a less desirable platform.
Management has been given a lot of leeway in hopes that they could turn Twitter around, but so far, that hasn't been the case, Sena added. While the stock has had a large decline already, he explained that shares could go lower if its next earnings report is weak.
Given the decline in Twitter, the stock starting to look attractive, Seymour said. He's also a buyer of Facebook.
For their final trades, Seymour is selling the iShares Russell 2000 ETF (IWM) and Nathan is a seller of Las Vegas Sands (LVS). Najarian said to buy Airgas (ARG) and Kelly is selling of the iShares High Yield Corporate Bond ETF (HYG).