Bulls breathed a collective sign of relief on Monday and sent the S&P higher after China's moves to curb inflation did not include an interest rate hike.
The move is particularly noteworthy, considering over the week-end new data showed inflation in China soared past forecasts to a 28-month high in November and to make the situation all the more precarious - it showed signs of spreading beyond food prices.
However, rather than raise rates, China's central bank raised lenders' reserve requirements (for the third time in a month) to sop up some of the excess cash in the economy that is driving prices higher.
These developments eased concerns that China’s tighter monetary policy could lead to a slowdown in one of the major growth engines of the global economy.
Developments suggest China's "foot is still firmly on the gas pedal, and that has lifted the risk trade in general," says Burt White, managing director and chief investment officer in a Reuters interview.
Should you position for further gains into year end? What’s the trade?
Instant Insights with the Fast Money traders
China should give commodities and industrials reason to run, says Pete Najarian. I’d put Deere, Caterpillar and other global industrial names on the radar. I’d also look at Walter Energy, Alpha Natural, Steel Dynamics and Joy Global.
I agree that the commodities trade has a long way to go, adds Brian Kelly. I'd keep a close eye on the copper market, especially, which is very tight. Also two more physically backed copper ETFs are coming to market on top of one that came to market on Friday. When physically backed gold and silver ETFs launch - they create demand; if the same happens with the copper ETFs copper could be in short supply.
In fact, the supply chain in copper -- as well as some other commodities -- is so tight, that even if China becomes less aggressive – it should not interrupt that story, adds Zach Karabell.
Rather than copper I’d play these developments long steel, says Steve Grasso. Currently steel is outperforming the market as a whole. And I’d play it long Letter X.
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CALL OF THE DAY: APPLE
Again Apple landed in the spotlight – this time after Goldman Sachs added this stock to its Conviction Buy list with a $430 price target, citing further growth and profit opportunities and better than expected iPad and iPhone sales in 2011.
The firm also sees tablets, such as the iPad, eating into the market for PCs - those that use Intel processors and Microsoft’s Windows software.
"What is surprising is that many of these products (tablets) are not utilizing Intel microprocessors or a Microsoft operating environment ... this would be the first time in three decades that a non-Wintel technology has made legitimate inroads into personal computing," analyst Bill Shope said in a note to clients on Sunday printed by Reuters.
What’s the trade?
I think the best play is long Apple, says Brian Kelly. They’re the best retailer out there with products that are in demand.
If you’re looking for a derivative trade; check out Cirrus Logic, adds Pete Najarian,.
I’m playing the space long LIT, says Steve Grasso – as a bullish bet on the demand for Lithium batteries.
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CAN YOU FIGHT THE FED? BET ON RISING INTEREST RATES
Around mid-day yields were slightly lower after hitting 6 month highs earlier in the session.
How should you trade ahead of the FOMC meeting Tuesday?
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HEALTH CARE
The health care sector experienced a mid-day pop Monday after a judge ruled against Obama's health care law in a Virginia court; first major ruling against the law.
The key issue here is whether the federal law's requirement that citizens buy health insurance or pay a penalty is constitutional.
What’s the trade?
It wouldn’t surprise me to see more cases like this one, says Steve Grasso. It’s an interesting thing to watch.
In the wake of these developments I wouldn’t touch this space, counters Zach Karabell. It suggests there’s going to be a lot of ups and downs.
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TICK BY TICK: NETFLIX SELL OFF CONTINUES
The traders are closely watching the action in Netflix which continued to sell-off Monday after a volatile week, last week.
What’s the trade?
I think there may be more room for a pullback, says Pete Najarian.
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Trader disclosure: On December 13, 2010, following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Karabell owns (AAPL), (GOOG), (IBM), (GS), (C), (FCX), (GE), (FXI); Pete Najarian owns (CRUS); Pete Najarian owns (C); Pete Najarian owns (MSFT) call spreads; Pete Najarian owns (YHOO); Pete Najarian owns (SMH) call spreads; Pete Najarian owns (DRYS) call spreads; Pete Najarian owns (F) bonds; Pete Najarian owns (GE); Pete Najarian owns (STLD) calls; Pete Najarian owns (CNI); Pete Najarian owns (WLT) call spreads; Pete Najarian owns (JOYG) call spreads: Grasso owns (ASTM), (BA), (BAC), (BWC), (C), (CSCO), (JPM), (LIT), (LPX), (MOT), (MHY), (NDAQ), (PFE), (PRST), (S), (X)
For Brian Kelly
Accounts Managed By Kanundrum Capital Own (AAPL)
Accounts Managed By Kanundrum Capital Own (BG)
Accounts Managed By Kanundrum Capital Own (DE)
Accounts Managed By Kanundrum Capital Own (DRYS)
Accounts Managed By Kanundrum Capital Own (MCP)
Accounts Managed By Kanundrum Capital Own (ANDE)
Accounts Managed By Kanundrum Capital Own (TBT)
Accounts Managed By Kanundrum Capital Own (FXY) puts
For Steve Grasso:
Stuart Frankel & Co and its partners own (AAPL)
Stuart Frankel & Co and its partners own (CSCO)
Stuart Frankel & Co and its partners own (CUBA)
Stuart Frankel & Co and its partners own (GERN)
Stuart Frankel & Co and its partners own (HSPO)
Stuart Frankel & Co and its partners own (NWS.A)
Stuart Frankel & Co and its partners own (NYX)
Stuart Frankel & Co and its partners own (PDE)
Stuart Frankel & Co and its partners own (PFE)
Stuart Frankel & Co and its partners own (PRST)
Stuart Frankel & Co and its partners own (RDC)
Stuart Frankel & Co and its partners own (TLM)
Stuart Frankel & Co and its partners own (XRX)
Stuart Frankel & Co and its partners own (SDS)
Stuart Frankel & Co And its Partners Own (UNM)
Stuart Frankel & Co and its partners are short (QQQQ)
Stuart Frankel & Co and its partners are short (MCD)
Stuart Frankel & Co and its partners are short (AAPL)
For Zachary Karabell
River Twice Capital owns (GS)
River Twice Capital owns (MSFT)
River Twice Capital is short (AA)
River Twice Capital is short (SMH)
River Twice Capital is short (XLF)
River Twice Capital owns (GS)
River Twice Capital owns (MSFT)
River Twice Capital is short (AA)
River Twice Capital is short (SMH)
River Twice Capital is short (XLF)
For Gene Munster
(ACOM), (DRIV), (LOGM), and (RLOC) have been investment banking clients of Piper Jaffray during the past 12 months
Piper Jaffray expects (DRIV) to be an investment banking client within the next three months
Piper Jaffray has done underwriting for (ACOM), (DRIV), (RLOC)
Piper Jaffray received non-investment banking securities-related compensation from (DRIV) during the past 12 months
Piper Jaffray is a market maker in (AAPL), (ACOM), (AMZN), (BIDU), (DRIV), (EBAY), (FMCN), (GOOG), (GSIC), (IACI), (KONG), (LOGM), (MCHX), (MELI), (PRTS), (RLOC), (SINA), (SOHU), (VCLK), (WWWW), (YHOO)
GE Is The Parent Company of CNBC
NBC Universal Is The Parent Company of CNBC
CNBC.com with wires.
