The Dow and S&P rallied on Monday, snapping a three-day losing streak, as a string of corporate takeovers in the technology and health-care sectors fueled optimism that value remained in the market.
With Monday's gains, the Dow Jones industrial average held an advance of about 16 percent in the quarter so far, which would make it the index's best such period since the fourth quarter of 1998.
What must you know about Monday's market action?
Strategy Session with the Fast Money Traders
I’m seeing maximum frustration in the market, muses Joe Terranova. What’s going on in the marketplace reminds me of the song, “Should I Stay Or Should I Go?” Investors don’t know if they should hang on or get out.
I think the song is “Waiting Is The Hardest Part,” says Guy Adami. I’ve been waiting for a pullback and it hasn’t come. However, I’m still bearish. It’s quite possible this M&A activity signals the top.
I’m not sure how much of this rally is real money being put to work and how much of it is window dressing for quarter's end, says Steve Grasso. Considering October’s history, I doubt it will be the month that investors say let me step off of the sidelines and get into stocks.
Options action suggests to me that investors are not worried, counters Jon Najarian. It seems like there’s cautious optimism in the market.
It's always a positive sign when you see companies putting money to work, whether they buy other companies, invest in new plants, (or) buy back their own stock," says Tim Smalls, head of U.S. stock trading at brokerage firm Execution LLC. With depressed stock prices, like we've had over the past year and a half, a lot of companies will find it cheaper to buy a company than to grow that same type of company organically. It's a more effective way to put money to work sometimes.
Among the companies announcing large takeover deals; Xerox agreed to buy Affiliated Computer Services for $6.4 billion while Abbott Laboratories said it would pay $6.6 billion for the drugs unit of Solvay .
The purchase gives Abbott full control of its Belgian development partner's cholesterol treatments and exposure to emerging markets.
Also there was a $400 million stock deal between the Dutch biotech firm Crucell and Johnson & Johnson as part of a flu vaccine development deal.
What’s the play?
I’m watching Abbott, says Guy Adami, but resistance tends to be $49. And as an M&A play I’d keep an eye on Greenhill and Jefferies .
I’d play it by getting long the KCE , counsels Joe Terranova.
CHIP NAMES LEAD NASDAQ HIGHER
The tech heavy Nasdaq closed higher on Monday after Citi upgraded Applied Materials to a ‘Buy” citing emerging opportunities for the companies solar-power business.
Cisco also provided a tailwind after Barclays Capital upgraded the firm to "overweight" rating from "equal weight," citing an improved outlook for its business in both Europe and North America.
Apple was another notable advancer with China Unicom saying it would begin selling the iPhone in China, starting in October. France Telecom's Orange also said it would sell the product later this year
What’s the tech trade?
I’m watching Intel , counsels Guy Adami. The price action leads me to believe this stock doesnot want to go higher. And I’m also watching RIM, he adds. If you’re looking to buy I think current levels may be an entry point.
I like Micron and other semi stocks because I think Corporate America is about to upgrade IT, says Jon Najarian, and Micron should be a beneficiary. Also, I’m seeing an unusual amount of options action in this name.
I think technology broadly is in play as the main beneficiary of the PC upgrade cycle, adds Joe Terranova. Names in the space I like include TXN , MSFT , and Apple .
Goldman Sachs downgraded the steel space from ‘Attractive’ to ‘Neutral’, citing concerns that prices could recede over coming months.
As part of the sector call, Goldman removed Steel Dynamics from its prestigious Conviction Buy list but maintained a Buy on the stock. It’s worth noting that Nucor remains their favorite pick in the space and in fact Goldman raised their price target from $53 to $55.
What’s the trade?
I happen to think Goldman is right, muses Guy Adami.
I also think Goldman is right, echoes Jon Najarian.
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Trader disclosure: On Sept. 28th, 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), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Terranova Owns (F), (KCE), (SUN), ABT); Terranova Is Short (CCL), (ESS); Terranova Works For (VRTS); Grasso Owns (AAPL), (ABK), (BAC), (C), (COST), (CSCO), (PFE), (V), (WMT); J. Najarian Owns (AAPL), (ACI), (BAC), (BX), (GHL), (GS), (SF), (TTWO),, (WFC), (MU), (PXP); J. Najarian Is Short (V); J. Najarian Owns (RIMM) & (RIMM) Calls
For Steve Grasso
Stuart Frankel Owns (ACS)
Stuart Frankel Owns (GERN)
Stuart Frankel Owns (HSPO)
Stuart Frankel Owns (MSFT)
Stuart Frankel Owns (NWS.a)
Stuart Frankel Owns (NYX)
Stuart Frankel Owns (PFE)
Stuart Frankel Owns (PDE)
Stuart Frankel Owns (ROK)
Stuart Frankel Owns (XOM)
Stuart Frankel Owns (PFE)
Stuart Frankel Owns (SDS)
Stuart Frankel Is Short (QQQQ)
For Dennis Gartman
Gartman Owns Gold In Euros
Gartman Owns 10-Year Bonds
Gartman Owns (AAPL)
For Geoff Porges
A Member of Porges' Household Owns (VRTX)
A Member of Porges' Household Owns (EXEL)
Sanford Bernstein Owns (HGSI)
Sanford Bernstein Owns (GILD)
Sanford Bernstein Owns (AMGN)
Sanford Bernstein Owns (CELG)
Sanford Bernstein Owns (VRTX)
Sanford Bernstein Makes A Market In (HGSI)
Sanford Bernstein Makes A Market In (GILD)
Sanford Bernstein Makes A Market In (GENZ)
Sanford Bernstein Makes A Market In (BIIB)
Sanford Bernstein Makes A Market In (AMGN)
Sanford Bernstein Makes A Market In (CELG)
Sanford Bernstein Makes A Market In (VRTX)
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