NEW YORK ( TheStreet) -- The markets soared on a broad-based rally Friday that saw the Dow Jones Industrial Average reach a high for the year.

The Dow jumped 155.91, or 01.67%, to 9505.96, while the S&P 500 rose 10.76, or 1.86%, to 1026.13. The Nasdaq added 31.68, or 1.59%, to 2020.90.

Steve Grasso said on CNBC's "Fast Money" TV show that people were "scratching their heads" over what is happening in the market. He said the shorts have been betting on the market to "come in" and that "bet hasn't worked." He also said that fact that today is options expiration day accounted for the extreme volumes.

Guy Adami said he's been more "wrong than the Mets' medical staff" in the past week with his predictions that the market would be heading down. However, he stuck to his prediction that the market is headed for a "big fall" while admitting today was "a slap in the face for me."

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 onTV

Joe Terranova said the rally is all about people being underinvested and asset allocation by mutual funds. However, he said that if the S&P slips to 975, people should head to the sidelines.

Karen Finerman was surprised by the strength of the rally, adding stocks have already priced in a sharp recovery. As a hedge fund manager, she expressed her skepticism about the rally but said it's hard not to be in the market when it is heading "straight up."

Terranova said that mutual funds' concern about year-end performance could have a bearing on what happened today.

The other big news of the day was oil, which was up 6% for the week. Terranova called it the biggest story of the week, with the contango coming out of the market. He said the big question now is whether the "speed of the oil advance" is going to choke off the recovery or lead the market higher.

With the sharp rise in oil, Terranova said he established a position today in Peabody Energy ( BTU - Get Report) , while adding to his positions in Suncor ( SU - Get Report), Weatherford ( WFT - Get Report) and Freeport McMoRan ( FCX).

Grasso said he and Terranova agreed that oil is heading to $85 and that his Occidental Petroleum ( OXY - Get Report) trade that he touted earlier has been working.

Melissa Lee, the moderator of the show, remarked that the Financial SPDR ETF ( XLF) hit a new high for the year today.

Finerman, who is long Bank of America ( BAC - Get Report), said the stock is the "place you want to be." She said the banking behemoth could reach a normalized earnings stream and higher multiple in a year and a half.

Adami sounded a word of caution, saying it's hard to get into the financials here, when they are up this much.

Terranova complemented Lee for making the "right" call on the financials when she called it a rally of the "trash financials," in reference to the likes of Citigroup ( C) and the regionals. He wondered at what point does the trade become the best of the breed again.

Finerman said it wouldn't be surprising if some big banks stepped in to buy some of these regionals. She said she is afraid of shorting the regionals because of that possibility even though their valuations are getting stretched.

Shifting to the retail sector, Lee said Gap ( GPS) ended higher on the day on better-than-expected results. Adami said that had been telegraphed for some time and anyone getting into the stock today wouldn't have made any money. He said the better trade is in J Crew ( JCG ), which he said he would short going into next week's earnings.

Terranova liked Disney ( DIS - Get Report) as a recovery play and sees it going above $30. Finerman said she liked Aeropostale ( ARO) and Wal-Mart ( WMT - Get Report), even though the latter was down today.

A big jump in July existing home sales sparked the market but Rick Santelli tried to put some perspective on it, when he pointed out it's just the first year-over-year positive number in 43 months. "We have a long way to go in housing," he said.

CNBC editor Charlie Gasparino said sources tell him Goldman Sachs ( GS) may try to repair its image on the contentious executive bonus controversy with a stock buyback plan.

The panel dipped into the healthcare space, with Grasso and Finerman touting their preference for Strkyer ( SYK - Get Report) and Zimmer Holdings ( ZMH).

Is America going the way of Rome? Lee brought in former commerce secretary Carlos Gutierrez, who believes the country should focused on dealing with its massive debt instead of thinking of ways to spend more government dollars.

He said the nation's debt is now 14% of GDP, the second highest in the world. He said the U.S. is going to have to borrow heavily to cover the interest rate payments. He said the country faces a weaker dollar and inflation as a result.

He said businesses have to play defense in this environment: looking at cash flow "like hawks," taking care of capital spending, cutting costs, making sure working capital is under control and hoping to grow the top-line.

He said it's difficult for businesses because they are not getting much regulatory relief and are waiting for the government to make the next move. He said the Obama administration is not focused on trade and has declared war on business.

Adami said he would short the dollar but admitted the trade "terrifies me." Terranova and Grasso see commodity prices going up based on this week's action.

For an options perspective of today's rally, Scott Nations, chief investment officer of NationShares, said there's been heavy call activity that is betting the S&P is heading to 1100. He said the market optimism is based on a tide of "relentless good news."

In the final trades, Terranova said to short Essex Property Trust ( ESS). Adami said to go long Abbott Labs ( ABT). Finerman liked Stryker, while Grasso advised making a "quick" buy of Citigroup.

-- Written by David Tong in San Francisco

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