'Fast Money' Recap: The Rally Continues

The trading panel looked at the catalyts for the rally.
Author:
Publish date:

The bulls had their way again on Wall Street on Monday as the markets responded favorably to President-elect Barack Obama's ambitious infrastructure plans and the movement toward a bailout resolution for the beleaguered automakers.

The

Dow Jones Industrial Average

rose 298.84, or 3.5%, to 8934.26, while the

S&P 500

jumped 33.63, or 3.8%, to 909.70. The

Nasdaq

was up 62.43, or 4.1%, to 1571.

Dylan Ratigan told the panel that the big news on the automaker rescue plans is that the federal government is considering granting the bailout in exchange for warrants to assume a 20% stake in the companies. In effect, this would put U.S. taxpayers ahead of shareholders and creditors.

As a result, Guy Adami said he didn't know whether investors "can be long on the common equity now."

Ratigan found no disagreement among the panel in his remarks that the tradeoff being here is the sacrifice of shareholder equity for maintaining employment levels and operations of the carmakers.

Jeff Macke said the action merely forestalls the "inevitable": "the equity going to zero."

Adami wondered whether the question that should be taken up at this point is whether there should be an auto industry in America.

Ratigan shifted the discussion to the stock market, which continued to move to higher ground after rallying at the end of last week.

Adami said he liked the "tremendous trading action" today and predicted the S&P will go up another 100 points if it stays above 900.

Tim Seymour credited the rally to extremely oversold conditions. And Pete Najarian noted the VIX volatility index is down to 60 but he's not seeing the speculative pullback that he's been normally seeing.

In after-hours trading, both

FedEx

(FDX) - Get Report

and

Texas Instruments

(TI)

were down sharply on disappointing earnings expectations. Ratigan said the S&P 500 futures were "weakening a tad" as a result of the news.

Ratigan commented on today's gains in commodity stocks as a result of Obama's infrastructure plans, with steel and copper names moving up.

Dennis Gartman said Obama is "throwing money at this problem and is not worried about the deficit." As a result, he said, steel, cooper and gravel stocks getting a lot of trading action.

Jeremy Zirin, senior equity strategist for UBS Wealth Management, said he definitely feels comfortable being overweighted in U.S. equities.

Zirin sees the recession lasting until the second and third quarters of next year, with the worst quarter of GDP growth in the fourth quarter of this year. He said he thinks the equities are in the process of finding a bottom right now.

In this environment, he said the prudent trading strategy would be to remain defensive. He favors consumer staples, health care and telecom, adding it's too early to be pro-cyclical.

According to Zirin, the industrials and materials may look cheap but they may be masking declining earnings and estimates that are too high.

Asked when he would be bullish on the tape, Zirin said he's waiting for aggregate earnings estimates need to be more reflective of economic reality.

Finally, Ratigan asked Jon Najarian to comment on the spike in exchange stocks today after word leaked over the weekend about a possible merger between Deutsche Boerse and

NYSE Euronext

(NYX)

.

Najarian said the market "clearly thinks there is a deal to be had" and linked it to the huge opportunity to be gained from having the $33 trillion credit default swap market traded on the exchanges.

This article was written by a staff member of TheStreet.com.