Both the Dow and S&P closed in positive territory after spending much of the day in the read. Ultimately, optimism about potential M&A deals trumped concerns about trade friction due to a new tariff.
Specifically, shares of power company AES Corp rose after a Wall Street Journal report suggested China's sovereign wealth fund was in talks to take a stake in the firm.
Also Sprint Nextel jumped after a British newspaper reported Germany's Deutsche Telekom was considering a bid for its U.S. rival.
And on the Nasdaq, shares of Dendreon Corp popped after analysts said there was renewed speculation the company, which is developing a vaccine for prostate cancer, is a takeover target.
"M&A activity is definitely starting to heat up. (The AES news) sparked interest in the whole utility sector," says Owen Fitzpatrick, head of U.S. Equity Group at Deutsche Bank Private Wealth Management.
Banks, which benefit from M&A activity, were among top gainers as well, with shares of JPMorgan leading gains on the Dow.
What’s the trade?
Strategy Session with the Fast Money Traders
It feels like money on the sidelines just has to chase returns, muses Karen Finerman. There was every reason for the market to go down on Monday, yet it didn’t.
I expect to see an end of year chase for performance, adds Joe Terranova. Historically September is a time of weakness but it’s not this year. That’s forcing money managers to buy.
I have not been a believer in the rally but you can’t fight the tape, adds Guy Adami. However, at some point the valuations will catch up with this market.
It seems to me that all the pieces are in place for stocks to continue higher, adds Pete Najarian. Industrials such as 3M and GE are on fire.
If you’re looking for an M&A trade, keep an eye on Dreamworks, counsels Adami. It could be a takeover target.
WALL STREET SHAKES OFF TOUGH-TALKING OBAMA
The financials closed higher despite comments from President Obama on Monday in which he said new signs of high-risk business behavior that nearly caused a financial meltdown a year ago are emerging. And he warned Wall Street there won't be another bailout.
He also urged Congress again to pass legislation putting stronger controls on the system, saying that the piecemeal approach in place when things cascaded toward meltdown last year must be corrected.
What’s the bank trade?
I thought Raymond James had a very interesting day, says Guy Adami. I keep my eye on it. (They’re one of those banks which benefit from M&A activity.)
I’d search out names that are performing such as Lazard and Stifel Financial, adds Pete Najarian. Also keep an eye on Blackstone .
TOPPING THE TAPE: BIOPHARMA GIVES MARKET BOOST
Shares of Eli Lilly closed higher after the drug maker said it will eliminate 5,500 jobs over two years and reorganize into five business units.
The Indianapolis company said it will reduce its work force by nearly 14 percent, to 35,000 from the current 40,500, by the end of 2011. The new total excludes hirings in high-growth emerging markets and Japan.
What’s the pharma trade?
I’d keep an eye on Dendreon, says Pete Najarian. Options were absolutely on fire. Also keep an eye on Hologic (HOLX) – again for unusual options activity.
Or keep an eye on Abbot Labs, counsels Guy Adami. If it closes above $48 it could have a lot of room on the upside.
In this space I like Stryker and Becton Dickinson, reveals Karen Finerman.
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Trader disclosure: On Sept. 14, 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 (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Finerman Owns (PDE), (RIG); Finerman's Firm Owns (BAC) Preferred Shares, Finerman Owns (BAC) Preferred Shares And Owns (BAC); Finerman's Firm Owns (WFC) Preferred Shares And Is Short (WFC); Finerman Owns (WFC) Preferred Shares; Finerman's Firm Owns (WMT), (RIG), (MSFT), (NOK), (PBR), (PDE), (SYK), (FLIR); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO); Najarian Owns (AAPL) & Short (AAPL) Calls; Najarian Owns (BAC) & Short (BAC) Calls; Najarian Owns (BUCY) & Short (BUCY) Calls; Najarian Owns (C) Calls; Najarian Owns (FCX), Owns (FCX) Put, Is Short (FCX) Calls; Najarian Owns (JPM) & Is Short (JPM) Calls; Najarian Owns (JOYG) & Short (JOYG) Calls; Najarian Owns (MS) And Is Short (MS) Call; Najarian Owns (MSFT) And Is Short (MSFT) Call; Najarian Owns (PALM) Calls; Najarian Owns (RIMM) Call Spread; Najarian Owns (TEVA); Najarian Owns (V) & Short (V) Calls; Najarian Owns (WFC) Put Spread; Najarian Owns (YHOO) Calls ; Najarian Owns (DNDN) Calls; Najarian Owns (HOLX) Calls; Terranova Owns December Gold Futures; Terranova Is Short (CCL); Terranova Works For (VRTS)
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