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Stay Bullish Despite Headwinds: Pro

Tuesday, 2 Jul 2013 | 12:56 PM ET
Stay Bullish on Stocks Despite Headwinds: Pro
Tuesday, 2 Jul 2013 | 12:00 PM ET
CNBC's Steve Liesman provides a preview of Friday's jobs report. JPMorgan's Tom Lee explains why there are a lot of reasons to recommend cyclicals -- because it's a good sector to be in if interest rates rise.

Investors should look past near-term headwinds for stocks – especially cyclical plays – to see upside through the year, Tom Lee of JPMorgan said Tuesday.

"If you look at history, they've generally been very good stocks to own when the economy is strengthening," he said.

"But they're also very good stocks to own when rates begin to rise partly because these aren't really search-for-yield instruments. This are really total-return investments."

On CNBC's "Fast Money," Lee noted that while he had been recommending cyclical stocks this year, they only started gaining traction since April.

Top Three Trades
The Fast Money traders have the play on Wells Fargo, JPMorgan, the downgrade in miners, and Zynga's new CEO. And CNBC's Steve Liesman reports NY Fed President William Dudley reiterates the FOMC's position on rates.

Lee also said that companies had been adjusting guidance statements because of the federal sequestration, or across-the-board spending cuts.

(Read More: Dennis Gartman's 'Watershed' Shift on Gold)

And although China has been weak, he added, European economic data was seeing improvement and could provide a positive surprise.

Lee's top sector picks included technology and health care.

While economies in Europe and emerging markets might still be lackluster, Lee added that cyclical companies could nevertheless continue to improve their bottom line from improvement in the United States.

(Read More: 'Dividend Aristocrats' vs. Rising Rates)

"We have to remember cyclical companies generate earnings wherever global growth takes place," he said.

Trader disclosure: On July 2, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Steve Weiss is long M; Steve Weiss is long C; Steve Weiss is long BAC; Steve Weiss is long F; Stephanie Link is long AAPL; Stephanie Link is long GS; Stephanie Link is long JPM; Stephanie Link is long WFC; Stephanie Link is long CSCO; Stephanie Link is long EBAY; Josh Brown is long AAPL; Josh Brown is long WFC; Joe Terranova is long VRTS; Joe Terranova is long TRV; Joe Terranova is long AXP; Joe Terranova is long OXY; Joe Terranova is long CRUDE OIL FUTURES; Joe Terranova is long MINI S&P FUTURES.

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