Pros eye cyclicals after strong China data
U.S. stocks traded higher on Monday after upbeat Chinese export data lessened concern about a sharp economic slowdown in a key developing economy.
To some professional traders, though, the strong economic news out of China is just another sign that the global economy is strengthening.
"Not only do you have China getting better, you have Europe getting better. You have Japan … The international markets [are] starting to show better-than-expected data," said Stephanie Link, director of research at TheStreet.com, noting international markets are trading anywhere between 1.3 and 1.5 times book value versus the U.S. market at more than 2 times book value. "So there's better value there."
(Read more: China's inflation data add to optimism, shares rise)
In turn, Link recommends buying cyclical stocks right now, which means the underlying companies tend to do well in strong economic times. Her firm currently owns shares of miners Joy Global and Vale, for example.
Joe Terranova, chief market strategist for Virtus Investment Partners, also likes the cyclicals, including Joy Global. He said the short trade for steel and coal names is over.
To Mike Murphy, CEO of Rosecliff Capital, Apple is a good way to play the strong economic news out of China, especially since the technology company is rumored to soon announce a deal with China Mobile that should broaden its appeal in Asian markets. He thinks the stock has a lot of upside.
Meantime, pros continued to debate about whether the Federal Reserve will begin tapering its asset purchasing program.
(Read more: Crisis warning? Fed 'playing with matches' again)
Last week, U.S. nonfarm payrolls increased by 169,000 in August, undershooting consensus estimates of 180,000, which will be a key consideration for the Fed when it meets to make a decision next week.
Terranova said there's no question the Fed will begin tapering. Money manager Anthony Scaramucci agreed, but added he thinks the tepid job growth will prompt the Fed to taper in a slower, more gradual way. To Link, however, the dollar amount the Fed cuts back its bond-buying program doesn't matter so much as the fact the U.S. economy doesn't need as much stimulus anymore.