The news from Europe on the Greek debt deal continues to create volatility, jerking around bond yields and currency values, Brian Kelly, founder of Brian Kelly Capital, explained on CNBC's "Fast Money" TV show. Ultimately, yields seem likely to go higher, especially once the Federal Reserve raises interest rates.
If and when interest rates move higher, it will likely give a boost to the U.S. dollar, according to Steve Grasso, director of institutional sales at Stuart Frankel. The stronger dollar hurts large multinational companies but tends to be good for small-cap domestic stocks. Overall, Grasso expects the broader stock market to move lower in the short-term.
Currently, the 10-year yield is near 2.25%, which has previously acted as resistance, pointed out Guy Adami, managing director of stockmonster.com. If rates begin to move higher and break out above that range, look for the insurance companies' stocks to outperform. His top pick is Prudential Financial (PRU) - Get Prudential Financial, Inc. Report.
"I don't know if it's overly concerning" that rates have been rising in recent trading, said Pete Najarian, co-founder of optionmonster.com and trademonster.com. However, if rates continue to rise, it will give a boost to financial stocks. In particular, online brokerage companies like E-Trade Financial (ETFC) - Get E*TRADE Financial Corporation Report and TD Ameritrade (AMTD) - Get TD Ameritrade Holding Corporation Report should outperform the sector.
In regards to the euro, Richard Ross, managing director at Evercore ISI, says the chart looks "structurally broken" and predicts the euro will head significantly lower. Currently, one euro is equal to $1.1173, but will likely be worth just $1 or possibly less in the not-too-distant future.
As the European Central Bank continues its quantitative easing program, it should help weaken the euro further, Ross explained. Because of the lower euro and recent pullback, he finds German equities as an attractive buying opportunity. A lower euro could also boost the U.S. dollar, which would have a negative impact on oil prices and a positive impact on small-cap stocks, as well as the technology, health care and consumer discretionary sectors.
Kelly, who is short the euro and plans to stay short the euro, says investors should see how Wednesday's ECB meeting impacts the currency going forward. Ultimately, he expects the euro to continue lower.
Likewise, Adami expects the dollar to continue higher.
Turning to the energy sector, Fadel Gheit, senior energy analyst at Oppenheimer & Company, said there could be an increase in mergers due to the major price decline over the past 12 months. As prices continued to slide, investors flocked to quality companies such as Exxon Mobil (XOM) - Get Exxon Mobil Corporation Report and Chevron (CVX) - Get Chevron Corporation Report. He believes that Exxon could make a bid for Chevron or Royal Dutch Shell (RDS.A) . Exxon is too big to grow on its own and would need to make an acquisition and cut costs in order to boost its results.
It seems unlikely that regulators would approve an Exxon-Chevron merger, Najarian said. However, oil services stocks could see some consolidation over the next several months. Kelly agreed, saying he likes the services industry on the long side.
Shares of Tesoro Corp. (TSO) have struggled to climb above $95. Currently trading at $85, Adami called the level "critical support" that the stock needs to hold. Otherwise, it could head lower.
For their final trades, Najarian is buying Stanley Black & Decker (SWK) - Get Stanley Black & Decker, Inc. Report and Kelly is a buyer of the Energy Select Sector SPDR ETF (XLE) - Get Energy Select Sector SPDR Fund Report. Grasso said to buy Deckers Outdoor (DECK) - Get Deckers Outdoor Corporation Report and Adami is buying Lions Gate Entertainment (LGF) .