With one day left in the quarter, the Dow and S&P ended in positive territory as fund managers snapped up winners in an attempt to embellish their portfolios.
Energy shares were a strong performer in the quarter, and a 3.4 percent jump in the price of oil lifted them even further on Monday.
Fund managers are building up their portfolios before the quarter ends on Tuesday in a ritual known as "window dressing" by selling some of the quarter's losers and scooping up the winners.
”Having the right positions (and) not showing a great deal of cash, that is really the main driving force here, says Marc Pado of Cantor Fitzgerald.
How should you be positioned?
Strategy Session with the Fast Money traders
I wouldn’t read too much into the day’s action, says Karen Finerman. There may be some window dressing going on but it probably doesn’t matter. I think we’re stuck in a sideways range until we get earnings and that’s not for another 2 to 3 weeks.
Some of the gains are being driven by real data, adds Tim Seymour. Industrial production was impressive in Japan – in fact, they just had their strongest increase since 1953.
I don’t disagree, says Guy Adami. But the Dow Transports didn’t participate and the rails are lower. I just can’t embrace the rally right here given that kind of action.
We keep hearing about an impending correction and it never comes, adds Joe Terranova. I still think there’s a lot of money on the sidelines that’s about to come into the market.
I would not want to be out of the market during the first couple days of July, echoes Seymour.
TOPPING THE TAPE: ENERGY
U.S. crude oil futures rose sharply on Monday as attacks in Nigeria and optimism about economic recovery helped to sideline concerns about tepid demand and high inventories.
What’s the oil trade?
If you want to play oil, I think you play it flat or long, counsels Joe Terranova.
I think the OIH is a great way to play, adds Tim Seymour. Or look at Transocean because I think demand is going up for rigs.
The move in oil caught me by surprise, counters Guy Adami. I don’t trust the action.
TOPPING THE TAPE: RETAILERS STRONG
Retailers traded higher on Monday led by shares of J.C. Penney which received an upgrade from JPMorgan analyst Charles Grom. In a note to investors he wrote that department store stocks have fallen out of favor, but that could present a buying opportunity, particularly in J.C. Penney's case. He raised his rating on J.C. Penney to "Overweight" from "Neutral" and lifted his share price target to $33 from $28.
What’s the trade?
It’s an interesting upgrade, muses Guy Adami. It could suggest some strength in the consumer. Personally, I’m keeping an eye on Home Depot and Gap. Both are trading extremely well.
Hewlett-Packard raised their guidance citing the number of notebooks they’re shipping, adds Karen Finerman. That also suggests more strength in the consumer – more strength than I would have thought.
I like playing the consumer with Mastercard, adds Guy Adami. But I wouldn’t pile in at these levels.
I like Banco Bradesco and Itau-Unibanco , adds Tim Seymour, as plays on the strong consumer in Brazil.
Or look at Brinker and Bed Bath and Beyond , adds Joe Terranova.
CHART OF THE DAY: TREASURY PRICES AND YIELDS
Treasury prices climbed for a third straight day Monday, boosted by end-of-the-quarter demand.
The increase pushed yields lower; in afternoon trading, the yield on the benchmark 10-year Treasury note fell to 3.49 percent from 3.53 percent late Friday.
That’s good news for homeowners and those looking to buy a home. Long-term Treasury yields are closely tied to interest rates on mortgages and other consumer loans, which have been rising in recent weeks. Some people have been worried that a spike in rates could dampen an economic recovery.
What’s the trade?
I still think there’s a strong chance we see inflation, muses Karen Finerman. I’m very pessimistic for the long-term.
BANKS STRONG IN LATE TRADING
The XLF made gains on Monday despite a report in the WSJ which said that government’s grand plan to address the toxic legacy issue, the Public-Private Investment Program, PPIP, has stumbled and lost momentum. And that small banks that are likely to suffer most.
Meanwhile, Fox-Pitt Kelton put out a note that said Citigroup shares should be avoided for now as it is far too early to estimate the magnitude of forthcoming losses.
All the traders agree that they’re very interested to see what banks have to say when they report earnings.
AFTER HOURS ACTION: H&R BLOCK
H&R Block Inc, the largest U.S. tax preparer, on Monday said profit rose 26
percent in the quarter encompassing the main tax filing season, beating expectations as customers turned to its Internet service for tax preparation.
Shares rose 4.7 percent in after-hours trade following the company's earnings report.
AFTER HOURS ACTION: APOLLO
Education provider Apollo Group Inc. said Monday its fiscal third-quarter profit soared more than 44 percent to $201.1 million as sales rose nearly 26 percent.
UBS has a $120 price target on this stock, reminds Guy Adami. I think this stock is worth a look.
ANALYZE THIS: STEVE JOBS RETURNS
CNBC’s Jim Goldman confirms that Apple Chief Steve Jobs has returned to work following a near six-month medical leave.
And according to an Apple spokesman, "Steve is back to work. He's currently at Apple a few days a week, and working from home the remaining days. We are very glad to have him back."
RBC analyst Mike Abramsky tells the desk, “I think Steve’s return probably offers upside in terms of innovation, brand and execution at the company, RBC analyst Mike Abramsky.”
So, how should you trade Apple, now?
Find out. Watch the video now!
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Trader disclosure: On June 29th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (C), (GS), (BTU), (AGU), (INTC), (MSFT), (NUE); Seymour Owns (AA), (AAPL), (BAC), (BX), (EEM), (FXI), (INFY); Seymour's Firm Owns (QCOM), (NOK), (EEM); Terranova Owns (TER), (RIMM), (MSFT), (XBI), (MS), (ABT); Finerman Owns (RIG), (ELX); Finerman's Firm Own (NOK), (PBR), (RIG), (TBT), (ELX), (HPQ); Finerman's Firm Owns (BAC) Preferred; Finerman Owns (BAC) Preferred; Finerman's Firm Owns (WFC) Preferred; Finerman Owns (WFC) Preferred; Finerman's Firm Is Short (IJR), (IYR), (MDX), (SPY), (USO)
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