'Fast Money' Recap: Hair-Trigger Market

NEW YORK ( TheStreet) -- The markets staged a late rally Tuesday on news from Europe on the prospects of a bank recapitalization plan.

The Dow Jones Industrial Average jumped 153.41, or 1.44%, to 10,808.71. The S&P 500 added 24.72, or 2.25%, to 1123.95. The Nasdaq surged 68.99, or 2.95%, to 2404.82.

Melissa Lee, the moderator of CNBC's "Fast Money" TV show, began the discussion with a Financial Times report that triggered the late market rally. The report touched on the possibility of a new concerted, coordinated effort to develop a recapitalization plan for the battered banks in Europe.

Karen Finerman was skeptical of the report. "I wouldn't be shocked if this doesn't come to pass."

Guy Adami said he would sell into any rally in the financials, while Joe Terranova stuck to his plan to invest in best-in-breed financial names like JPMorgan ( JPM), which was up 5.81% today.

Lee shifted to Apple's ( AAPL) announcement, which turned out to be one for the iPhone 4s instead of the widely expected iPhone 5.

CNBC reporter Jon Fortt said there was a sense of disappointment from the announcement because the expectations were focused on the iPhone 5 and an update for the iPod.

On the other hand, he said the good news is that Apple will have a new product heading into the holiday season without having to retool the factories and without having to worry about rushing new product onto shelves.

Colin Gillis, director of research for BGC Financial, said the announcement, though not a "home run," was more than adequate. He said Apple will enjoy good margins and remain in the driver's seat in smartphones. He didn't back away from his 12-month price target of $450.

He also told the panel not to ignore the impact of Apple's other new products: its iCloud service and new operating system for mobile devices.

As for spinoff trades, Stephen Weiss liked Qualcomm ( QCOM), which make chips for the Android and Apple phones. Terranova said he liked Nuance ( NUAN), a maker of speech-recognition software, a feature of the iPhone 4s.

Are there cracks in China's growth story? Jing Ulrich, a managing director for JP Morgan, said that although China's growth may be slowing, the consumer sector remains strong and American businesses are faring well in the country.

She said the slowdown is being engineered by the central government to control inflation. She downplayed the real estate bubble, noting many Chinese use cash to purchase their homes. She said China's GDP is estimated to be 8.9% for 2011 and 8.5% for 2012.

She did say Chinese are losing confidence in investing stocks and are turning to gold and real estate.

Options trader Jim Inourio said the market is poised for a short-term rally after the VIX fell 10% to 40.82.

Shifting to sell off in gold and oil, Terranova attributed the decline in the price of gold to investors selling the metal to raise cash.

David Greenberg, president of Greenberg Capital, said the fall in the price of oil isn't surprising. He said he had urged selling oil when it was at $105 and now believes it may have reached a bottom at $75. He said the fall in the price of oil is part of the "deleveraging of everything."

He said he expects Brent crude to rally after closing at $102 today, and he said the Obama administration should investigate why gasoline prices haven't fallen in recent weeks along with the decline in crude.

Terranova, though, said it was not surprising to see gasoline prices not decline when diesel prices are up 8% and the reformulated spot contract for gasoline is up 2%.

Lee brought in Chris Ecclestone, a mining strategist with Hallgarten, to comment on the correction in rare earth stocks. Ecclestone acknowledged what he called a severe correction that is especially hurting companies working on projects in the advanced feasibility stage. He said it's a tough financing environment, with banks closely watching the first tranches of production from companies like Molycorp ( MCP).

Lee noted that Yahoo! ( YHOO) was up 8.8% on takeover rumors. Finerman said the valuation has come down a lot, making the risk-reward compelling.

Lee said that Yum! Brands ( YUM) were up slightly after reporting an inline EPS and revenues that were above estimates. Adami said there were cracks in the margins but said the stock was interesting especially if one thinks the S&P has turned the corner. Terranova said the better play in this space was McDonald's ( MCD).

In the final moves, Khouw liked industrial names like Caterpillar ( CAT) and Deere ( DE). Adami liked NRG Energy ( NRG). Terranova liked the high-flying retail names like Ralph Lauren ( RL) and Tiffany ( TIF).

-- Written by David Tong in San Francisco.

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