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Morning Note: Rising Oil to Kill the Rally?

Will rising oil prices kill the rally? That was a concern for Fast Money Traders Monday morning as the markets rallied sharply on news of billion-dollar deals and promising reports of Japan’s progress containing the damaged from its stricken nuclear plants.

The Dow broke above 12,000 Monday morning, rising nearly 200 points in early trading and extending last week’s post sell-off rally. The S&P 500, meanwhile, was rallying toward the key 1,300 level. The Nasdaq was up nearly 2%.

But stocks were not the only assets rising Monday. Nymex crude was trading above $103 per barrel on new news of Middle East unrest. Yemen was dominating the headlines Monday after reports that key military commanders were joining with anti-government protesters.

“Yemen seems to be the hot spot du jour,” said Kanundrum Capital’s Brian Kelly. “Most of the army is switching to the rebel side. So that is keeping oil up.”

The news out of Yemen were just the latest headlines supporting higher oil prices. Markets have largely priced in suspended production from Libya throughout the remainder of the year due to a burgeoning civil war in that country. Allied jets bombed Libya’s Col. Gaddafi’s compound in Tripoli early this morning in an effort to keep the government from attacking civilians, according to government officials.

At least one Fast Money guest was betting that higher oil prices would threaten the global recovery and, ultimately, stocks.

“With unemployment at 9%, higher oil is a real problem,” said Gluskin Sheff Chief Economist David Rosenberg. “This is a huge tax on the U.S. consumer.”

Without raising wages, the U.S. consumer will have to cut back on other expenditures in order to fill their gas tank, said Rosenberg. That will translate to weaker corporate earnings.


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Trader disclosure: On March 21, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Guy Adami is long (AGU); Guy Adami is long (C); Guy Adami is long (GS); Guy Adami is long (MSFT); Guy Adami is long (NUE); Guy Adami is long (INTC); Guy Adami is long (BTU); Steve Cortes is long (TM); Steve Cortes is long (GS); Steve Cortes is long (CSX); Steve Cortes is long (SDY); Steve Cortes is long (SO); Steve Cortes is long (S); Steve Cortes is long Crude Oil; Steve Cortes is short (F); Steve Cortes is short (C); Steve Cortes is short (UNP); Steve Cortes is short (SPY); Steve Cortes is short (DBA); Steve Cortes is short Wheat; Steve Cortes is short Soybeans; Steve Cortes is short AUD/USD; Steve Cortes is short CAD/USD; Steve Cortes is short EUR/USD; Tim Seymour is long (T); Tim Seymour is long (CCJ); Tim Seymour's firm is long (POT); Stephen Weiss is long (MSFT); Stephen Weiss is long (VZ); Stephen Weiss is long (QCOM); Stephen Weiss is long (CF); Stephen Weiss is long (JPM); Stephen Weiss is long (FAS); Stephen Weiss is long (HBAN); Stephen Weiss is long (HPQ); Stephen Weiss is long (MEE); Stephen Weiss is long (CNX); Stephen Weiss is long (DVN); Stephen Weiss is long (COP); Stephen Weiss is long (HK)

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