Stocks rebounded from last week’s downturn, Monday, as investors turned bullish after new data showed the manufacturing sector expanded for the fifth straight month.
Bullish sentiment also stemmed from a growing belief that Friday’s jobs report will show the smallest number of job losses since the recession began.
On top of those market catalysts, the Fast Money traders were also closely watching the action in bank stocks which traded higher, after Morgan Stanley received two separate upgrades: Credit Suisse upgraded Morgan Stanley to 'Outperform' while UBS lifted its outlook to ‘Buy' from ‘Neutral.'
Is it time to get bullish on bank stocks?
Instant Insights with the Fast Money traders
I’m positive on Morgan as well as Goldman Sachs, says OptionMonster Jon Najarian. Goldman hasn’t broken below $160. I think GS may be one of the most under-loved stocks in the space.
I agree fundamentally, says Joe Terranova but I’d play it with a long position in the KCE . Both Goldman and Morgan are part of this ETF but it also contains other asset managers that I like.
Looking at the market broadly, I’d ignore macro economic data and instead focusing on expectations for corporate profits, counsels Zach Karabell of RiverTwice. I'd assume there’s going to be no job creation and invest accordingly. Don’t look at companies that depend on a good jobs report for their profitability going forward.
And if you're a short-term trader, I’d be taking profits on Monday’s rally, counsels Jon Najarian. The market is very focused on Friday’s jobs report and I’m a little cautious.
COMMODITIES LEADING THE WAY
Gold rose sharply on Monday as the dollar traded lower against a basket of currencies amid speculation inflation may rise this year.
Meanwhile gold’s strength lifted other precious metals, with palladium climbing to its highest since July 2008, and platinum hitting a 16-month peak. In fact, the traders are looking at the long-term returns an a wide range of commodities. They follow:
Commodities Return Since 2000
S&P 500 -23%
Source: Birinyi Associates
Should you stick with commodities going forward?
I’m not that enthusiastic about staying with commodities long-term, says Mike Khouw of Canter Fitzgerald. I wouldn't mind being long some of the oil names but owning gold probably isn't the way I'd go for the long term.
OIL TOPS $81
Energy shares pushed the S&P higher after Deutsche boosted its outlook on refiners and raised its ratings on several individual names, including Valero Energy and Sunoco .
Adding to the bullish tone, crude oil broke above $80 on expectations of a cold winter and a supply dispute between Russia and Belarus.
What’s the oil trade?
The oil futures space is probably not the best energy play, says Joe Terranova. Instead I’d look at the XLE.
Or look at Chevron on the bullish Barron’s article out this past weekend, adds Mike Khouw. CVX trades at an attractive multiple.
TRADING THE GLOBE: CHINA
New data out of China show’s manufacturing activity expanded at the fastest rate on record in December.
Specifically, the HSBC Purchasing Managers' Index rose to 56.1 from 55.7 a month earlier to reach its highest level since the survey began in April 2004.
What’s the best way to play China’s growth?
I’d look at Rio Tinto, says Tim Seymour. It probably has 10% upside however, near term resistance is $245. And I’d look at companies with exposure to copper and nickel such as BHP and Vale.
And I’d note that the data is from HCBS not the government, adds Seymour.
I’d play it with global industrials such as Bucyrus , counsels Zach Karabell.
CALL THE CLOSE
Joe Terranova: I’d be nimble and get in and out.
Mike Khouw: I’m seeing profit taking in the options markets.
Zach Karabell: I’m a buyer. I think the rally has some legs.
Jon Najarian: I’m taking profits.
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Trader disclosure: On January 4th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders;
For Guy Adami:
Adami Owns (AGU)
Adami Owns (C)
Adami Owns (GS)
Adami Owns (INTC)
Adami Owns (MSFT)
Adami Owns (NUE)
Adami Owns (BTU)
For Pete Najarian:
Najarian Owns (CLF), Is Short (CLF) Calls
Najarian Owns (MGM)
Najarian Owns (MS)
For Karen Finerman:
Finerman Owns (GOOG)
Finerman's Firm Is Short (IJR)
Finerman's Firm Is Short (IWM)
Finerman's Firm Is Short (MDY)
Finerman's Firm Is Short (SPY)
Finerman Owns (AAPL)
Finerman's Firm Owns (BAC) Preferred, (BAC), (BAC) Call Spreads
Finerman Owns (BAC) Preferred, (BAC)
Finerman's Firm Owns (CSCO)
Finerman's Firm Owns (MSFT)
Finerman's Firm And Finerman Own (RIG)
Finerman's Firm Owns (VOLC)
Finerman's Firm And Finerman Own (WFC) Preferred
Finerman's Firm Owns (CMP)
For Tim Seymour:
Seymour Owns (AAPL)
Seymour Owns (BAC)
Seygem Asset Management Owns (CZZ)
Seymour Owns (FXI)
Seymour Owns GE
Seymour Owns (INTC)
Seymour Owns (LVS)
Seymour Owns (MSFT)
GE Is The Parent Company Of CNBC
For Mark Mahaney:
A Citi Associate Owns (YHOO)
A Citi Associate And A Citi Research Assistant Own (GOOG)
Citigroup Global Markets Or Affiliates Owns 1% Or More Of (YHOO), (PCLN),
Citigroup Global Markets Or Affiliate Received Non-Investment Banking Compensation From (GOOG), (AMZN), (YHOO), (EXPE) In Past 12 Months
(GOOG), (AMZN), (YHOO) Are Or In Past 12 Months Were Non-Investment
Banking Clients Of Citigroup Global Markets (Securities-Related Services)
(GOOG), (AMZN), (YHOO), (EXPE) Are Or In Past 12 Months Were Non-Investment Banking Clients Of Citigroup Global Markets (Non-Securities-Related)
Citigroup Global Markets Is A Market Maker In (GOOG), (AMZN), (YHOO), (EXPE), (PCLN), (NFLX), (AKAM)
Citigroup Global Markets And/Or Affiliates Has A Significant Financial Interest In Relation To (GOOG), (YHOO), (EXPE)
Citigroup Global Markets Or Affiliates Owns 2% Or More Of (YHOO)
For Robin Farley:
UBS AG & Affiliates Owned 1% Or More Of (WYNN) As Of End Of Last Month
(WYNN) Is Or In Past 12 Months Was An Investment Banking Client Of UBS
UBS Securities LLC Received CompensationFrom (WYNN) In Past 12 Months
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