) -- Bullishness reigns on Wall Street, with the Volatility Index declining 13% over the past week and the Santa Claus rally coinciding with the most bullish sentiment from investors in 38 months.

Front and center in the rally on Wednesday was the financial sector.


(JPM) - Get Report

led returns in the

Dow Jones Industrial Average

on Wednesday, gaining 3%.

Bank of America

(BAC) - Get Report

was up 3% also.

With a lack of bank-specific news in the market, the "Fast Money" crowd says that it's forgotten fundamentals in the sector and sector rotation behind the big move up in the financial stocks. The SPDR Financial is up 8% since Dec. 1.

For a breakout of some stocks from a recent "Fast Money" TV show, check out Dan Fitzpatrick's "3 Stocks I Saw on TV."

3 Stocks I Saw on TV

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Karen Finerman says that the strength in financials reflects the fact they were out of favor in the second half of 2010. Yet loan growth, a steeper yield curve, dividends coming back into play and stock buybacks will all help the financial sector to continue to attract investing momentum.

Brian Kelly says the yield curve in the U.S. looks better than in Europe, and without the European debt woes. It is also more attractive than the Japanese economic picture, which all contributes to bullishness on the U.S. banking stocks.

Tim Seymour says that underwriting was up 16% in the last quarter. That's just one factor among all the underlying metrics showing that things are getting better for the banks, while at the same time their loss exposure is declining.

Bank of America is up 18% since the Wikileaks revelations. "All the bad news was already priced in," says Seymour.

Anthony Scaramucci says that JPMorgan, Bank of America and


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are all well positioned for the reflation trade. "2011 will be the year for bank stocks."

Karen Finerman reminds investors to not overlook the thrift bank stocks amid the financial rally. The thrifts have been up for the last few days and will continue to benefit during the financial rally.

The "Fast Money" crowd also thinks insurers are well-positioned alongside the banks, such as

The Hartford

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(PRU) - Get Report


Underwriting trends, backed by improving sectors like auto sales, bode well for insurance companies, and these stocks were among the most beaten up. Prudential is trading at 9 times earnings, for example, vs. 15 times for its peer group.

Amid all the hoopla over the financial leaderships in the past few weeks, is there good cause for investors to take a pause and wonder whether the markets are getting a little frothy?

Karen Finerman says there is definitely reason to be a little concerned, especially when an investor looks at the chart comparing the S&P 500 and the VIX. That chart is as wide as it's been at any time since right before 2008. "If you want to stay long and be bullish, buy protection for cheap," Finerman says. An example is upside calls on the VIX index.

While financials are rallying,


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ran out of room to run, falling 6% after its earnings disappointed. Did the sneaker empire really trip on its earnings?

"Fast Money" traders says maybe it's not as bad as it seems. There are concerns about margin pressure and rising input costs, but Nike was falling from an all-time high after the earnings. Nike was priced for perfection going into the earnings.

Karen Finerman says the 6% drop in Nike shares it makes Nike 6% more attractive, and that's not attractive enough for her. Nike is still an expensive stock, and even though its problem was running up too much going into earnings, it's not priced to buy yet.

Tim Seymour says $84 is the level to trigger a Nike buy, and the stock needs a few more days before it gets there.

Anthony Scaramucci still thinks Nike is a great stock for 2011, but Scaramucci and the "Fast Money" crowd turned attention to

Foot Locker

(FL) - Get Report

, which got an upgrade from FBR Capital Markets on Wednesday.

Brian Kelly says Foot Locker is the better bet than Nike. Though Nike's North America sales were a positive surprise in the earnings, that's a leading indicator for Foot Locker.

Retail giant Nike was the poster child for the recent retail stock rally, but with financial stocks all the rage, "Fast Money" invited financial stock analyst Ed Groshans of Heights Analytics onto the broadcast to provide his top financial stock trades of 2011.

The bank analyst's No. 1 trade for next year is

Wells Fargo

(WFC) - Get Report


It's not a call out of left field, to say the least, but Groshans notes that Wells Fargo made it through the financial crisis much better than its competitors, and it's added Wachovia's earnings power, on top of core fundamentals that remain strong, and a dividend yield between 2% and 3%.

With Wachovia being folded into Wells Fargo, the "Fast Money" crowd is curious to pick the brain of the analyst about which bank did the best in integrating acquisitions during the financial crisis.

Groshans says it's hard to argue with JPMorgan being the best at integration, but its shares already have a premium built in for that fact. Wells Fargo has had a nice move up, but it's more of a stable bank stock. JPMorgan is all over the place in Groshans' estimation, while Wells Fargo is a play on the commercial banking sector. As for Bank of America, it has "its foot in every pond and is hit by every issue," the Heights Analytic analyst says.

The bank analyst is as bearish about

TCF Financial


as he is bullish on Wells Fargo. Groshans says to sell TCF Financial and

Regions Financial

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TCF Financial trades at a premium it deserved while building a great franchise. However, the bank analyst says that it grew on free checking, debit charges and overdraft charges, and the latter two have both been hit by new regulations. "The debit interchange regulation was significantly harsher than everyone thought, and this was a cornerstone removed from the business and creates a disruption for its strategy, so it's time to step away, especially since it's been up for the past few days," Groshans says. "It's looking rich to me," the analyst adds.

Bed, Bath & Beyond

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traded higher after its earnings, with a lot of positives in the results for the retail company, according to Brian Nagel, analyst at Oppenheimer & Co.

Bed, Bath & Beyond did show weaker gross margins, and that wasn't surprising, given rising inventory input prices, but the company announced that over the next two years, it's going to buy back $2 billion in stock repurchases. As far as the rising costs, the Oppenheimer analysts thinks that Bed, Bath and Beyond will be able to pass on some of the rising costs to consumers, but the waning gross margins this quarter vs. past quarters reflect a definitive trend.

Bed, Bath & Beyond profits still beat street expectations, and the Oppenheimer analyst challenges the contention that the company is as vulnerable as Best Buy when it comes to online competition. "Every retailer is susceptible to the trend of losing customers to online competitors, but Best Buy is more price sensitive and big ticket in nature. Towels and sheets are not big-ticket items like TVs, and lots of time consumers don't feel the need to shop around for price on Bed, Bath & Beyond products," Nagel says.

Office Depot

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was the M&A play of Wednesday, up more than 9% on takeout speculation, after the company filed a form with the SEC related to change of control provisions. Options on Office Depot were the bullish options trade of the day.

Is Office Depot vulnerable? Karen Finerman says it's a Delaware corporation, which makes it friendly to shareholders, and it has a staggered board, but just because there's smoke doesn't mean we know there is fire. Morninstar put out a note on Wednesday saying that Office Depot is a prime takeout candidate.

Tim Seymour notes that Office Depot volume was huge last Friday because it sold off its Japanese business, and that sale tells you that the company may be receiving investment banker advice on how to get the business trimmed for M&A activity.

The bullish financial sector also made an appearance in Anthony Scaramucci's hedge fund trade of the week:

Broadridge Financial

(BR) - Get Report


The company was spun out of ADP in 2007 and still has a near monopoly in the proxy solicitation business. Anything related to investor relations is outsourced to Broadridge, and it has a 2.7% dividend yield.

Broadridge has some heavyweight investors among its shareholders: Omega Advisors, Greenlight Capital, Whitney Tilson and George Soros. "It's in the value-stock category and has a monopoly-like franchise and could eventually be taken out, revealing 30% to 40% upside," Scaramucci says.

Even though the movement to electronic proxies made the company vulnerable, Scaramucci says that the Broadridge management has stayed ahead of that trend and still has little competition. Most importantly, it's a very inexpensive stock. It's moved sideways for 12 months, but "someone will see the value and realize it," Scaramucci says.

Another beat-down stock that Anthony Scaramucci says looks good over the long-term is everyone's least-favorite tech stock of the moment,

Cisco Systems

(CSCO) - Get Report

. Scaramucci says investors just need to look at the way the market has traded vs. Cisco in the last few months since its disastrous earnings, and it's clear there is no momentum in this stock. However, that means the value buyer can buy a strong franchise with great cash flow and balance sheet. For an investor with a three- to five-year time horizon, Cisco is a buy.

A much more speculative tech trade that made the news was China's


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, which was visited by Mark Zuckerberg of Facebook, while the baby-faced tech king was on "vacation" in China. Sina caught the attention of the "Fast Money" crowd, too. Sina shot up on the Facebook CEO's visit to the Chinese blogging company, and in a sector with absurd valuations, Sina is an inexpensive stock.

Finally, in a very different kind of value play for 2011, Karen Finerman says "time heals all wounds" and it's time to buy


(BP) - Get Report


-- Written by Eric Rosenbaum from New York.

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