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Update: Is Recovery This Priced In?

Both the Dow and S&P closed lower on Thursday with investors reluctant to take on much more risk before the new year.

Even a series of better-than-expected economic reports couldn’t spark buying activity and the data was clearly bullish.

For example, new U.S. claims for unemployment benefits dropped 34,000 to a seasonally adjusted 388,000, the lowest reading since early July 2008. (That was well below economists' expectations for 415,000.)

The Institute for Supply Management-Chicago's business barometer for the Midwest provided an even more bullish signal. It jumped to 68.6, the highest since July 1988, from 62.5 in November. Economists had expected it to dip. Any reading above 50 indicates the region's economy is expanding.

Further brightening the picture, pending sales of previously owned homes rose more than expected in November.

Is the recovery just this priced in?

Instant Insights with the Fast Money traders

Yes, the recovery is this priced in, says Steve Cortes. The market has come a long way in December. And Europe continues to trade quite precariously. That too is hampering gains in the S&P. I’d take profits.

As far as I’m concerned the Chicago PMI data looked really good, counters Brian Kelly. I don't think this type of recovery is priced in. I’d buy stocks at these level - for the short term - based on this new data. Themes that have worked all year should continue to work. I’m bullish up to 1280 on the S&P.

The sideways action in market probably isn’t bad, adds Patty Edwards. We’re overbought and it makes sense that the S&P would pause. I too am buying – but strategically.

I expect we see a gangbuster January based on these numbers, adds Jon Najarian. From the inputs we're seeing, I have ag as well as hard commodities such as coal on my radar.


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FAST FLASH: GM HITS POST-IPO HIGH

The traders still have GM on their screens with the stock jumping to a new post-IPO high.

What’s the trade?

Options action in GM has been very strong, says Jon Najarian, but I'm not sure if its a squeeze or a belief that this ship is finally in order. Perhaps it's some of both.

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POWER RANKINGS: TOP 5 ONLINE HOLIDAY SALES JUMPS

The desk is very bullish on a new shopping trend. According to the last Comscore data online spending surged 13% to a record $31 billion this holiday season.

Take a look at how those dollars breakdown:

Top 5 Percentage Increase
Comp. Hardware +23%
Books/Magazines +22%
Cons. Electronics + 21%
Comp. Software + 20%
Toy Sales + 16%
Source: Comscore

What’s the takeaway?

I’d keep an eye on Visa and Mastercard , says Jon Najarian. Both should benefit from the trend.

On a related note, typically the retail trade is long after Labor Day and then out by Black Friday, he adds. Some investors may have overstayed their welcome in retail and you may see the sector sell-off.

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WALL STREET TRADING DIES NEXT YEAR?

Will Wall Street trading die down next year? That's what analysts at Credit Suisse, as well as Credit Agricole's Mike Mayo think. Both cut estimates on Goldman and Morgan Stanley.

What’s the takeaway?

I like the brokers, but technically Goldman is struggling at $170, says Steve Cortes. I’m not a buyer unless it breaks above that level. And I’m bearish the European banks.

Right now Morgan and Goldman are trading at 12 times forward earnings when historically they traded 16 times, says Brian Kelly. I just think there's upside in this space. I like Morgan Stanley.

Looking at the banks, I think Citi is just itching to break above $5, says Todd Gordon.



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Trader disclosure: On December 30, 2010, following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Cortes is short Gold; Cortes is short Nat Gas; Cortes is short Corn; Cortes is short (LVS); Cortes is short (BCS); Cortes is short (XHB) vs. S&P; Cortes is short (XRT) vs. S&P; Cortes owns (TSN); Cortes owns (EXC); Jon Najarian owns (AAPL), is short (AAPL) calls; Jon Najarian owns (APC), is short (APC) calls; Jon Najarian owns (BBT), is short (BBT) calls; Jon Najarian owns (BBY), is short (BBY) calls; Jon Najarian owns (CSCO), is short (CSCO) calls; Jon Najarian owns (GS), is short (GS) calls; Jon Najarian owns (GM), is short (GM) calls; Jon Najarian owns (IBM), is short (IBM) calls; Jon Najarian owns (MBI), is short (MBI) calls; Jon Najarian owns (NKE), is short (NKE) calls; Jon Najarian owns (MOS), is short (REE) calls; Jon Najarian owns (MCP), is short (MCP) calls; Jon Najarian owns (REE), is short (REE) calls; Jon Najarian owns (AMR), is short (AMR) calls

BRIAN KELLY
Accounts Managed by Kanundrum Capital Own (BBT)
Accounts Managed by Kanundrum Capital Own (FCX)
Accounts Managed by Kanundrum Capital Own (GDXJ)
Accounts Managed by Kanundrum Capital Own (GLD)
Accounts Managed by Kanundrum Capital Own (JPM)
Accounts Managed by Kanundrum Capital Own (MCP)
Accounts Managed by Kanundrum Capital Own (SLV)
Accounts Managed by Kanundrum Capital Own (TBT)
Accounts Managed by Kanundrum Capital Own (WFC)
Accounts Managed by Kanundrum Capital Own (LYC.AU)
Accounts Managed by Kanundrum Capital Own USD
Accounts Managed by Kanundrum Capital Are Short The Euro

PATTY EDWARDS
Edwards owns (AAPL) for clients
Edwards owns (AMZN) for clients
Edwards owns (C) for clients
Edwards owns (F) for clients
Edwards owns (GE) for clients
Edwards owns (GS) for clients
Edwards owns (GLD) for clients
Edwards owns (MSFT) for clients
Edwards owns (NKE) for clients
Edwrads owns (SLV) for clients
Edwards owns (TGT) for clients

TODD GORDON
Gordon is long U.S. Treasuries

KEN SHUBIN STEIN
Shubin Stein And Spencer Capital Management Own (DGX), (MYGN)
Shubin Stein and Spencer Capital Management have no disclosures on LH

HENRIETTA TREYZ
Henrietta Treyz does not have disclosures

BRIAN STUTLAND
Stutland is short IBM puts

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