'Fast Money' Recap: Sizing Up the Rally

NEW YORK ( TheStreet) -- The markets rallied Tuesday off an encouraging start to the earnings season.

The Dow Jones Industrial Average jumped 69.78, or 0.56%, to 12,42.47. The S&P rose 11.37, or 0.89%, to 1,292.07. And the Nasdaq was up 25.94, or 0.97%, to 2,702.50.

Tim Seymour said on CNBC's "Fast Money" TV show that he believes in this rally. He said Europe is not that "much of a basket case," adding there is good U.S. data and evidence that China is doing a lot more to get its economy moving.

Joe Terranova, who had been in a defensive posture going into this year, detected a shift in the market, with some of last year's laggards such as industrials, financials and homebuilders leading the current charge. He also said the market is repricing Europe so that it doesn't have a negative onus on the markets.

Terranova said he is not so much risk-on as he is being less defensive at the start of the year.

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

Dan Nathan was not so optimistic about the rally, saying the higher the market goes, the bigger the drop for the remainder of the year.

Mike Khouw said in many instances investors have been trying to catch a pop in stocks like Bank of America ( BAC) and Netflix ( NFLX) that had been down for quite a while. But he said it's hard to believe Bank of America's troubles are behind it.

For a technical perspective, Chris Verrone, head of technical analysis for Strategas, said the markets do look a little better, with the S&P taking a good shot today at 1293.

However, he said he wouldn't be surprised if there is pullback, in which case he would stick to mega-caps, which usually come on strong when the market is late in the cycle. He especially liked two mega stocks: Intel ( INTC) and Pfizer ( PFE).

Melissa Lee, the moderator of the show, noted a Bloomberg report saying that Microsoft's ( MSFT) PC shipments might be worst than expected because of floods in Thailand.

Nathan said the news shouldn't come as a surprise because it had been telegraphed in prior reports. Terranova said Microsoft should weather the difficulties because its business division is doing well, along with its products and services.

Seymour agreed, saying Microsoft's Xbox is doing well and reminding viewers the stock offers a 3% dividend and growth.

Lee brought in Wendell Weeks, chairman and CEO of Corning ( GLW) to talk about Gorilla Glass 2. He said the latest version of Gorilla Glass is 20% lighter with the "same legendary strength."

He said the new, thinner glass is aimed at sleek, touch sensitive devices such as tablets, smartphones, televisions and PCs. He said he expects more profits from Gorilla Glass 2 than Gorilla Glass 1, which brought in $700 million in revenues in 2011.

Weeks said Gorillia 2 will be targeted to devices and apps that employ touch technology.

Terranova had reservations about Corning, saying it still has structural problems in an industry that is expecting further price cuts in 2012. Seymour, on the other hand, liked Corning, saying it was a good company with a strong brand and new uses for its prized glass.

With the VIX hitting a five-month low and approaching 20, Nathan said the trend indicates a lot of investor complacency.

Lee brought in Clay Siegall, president and CEO of Seattle Genetics ( SGEN) to discuss what his company has in the pipeline.

He said the most promising drug, Adcetris, which treats two rare lymphomas, has done well since it was launched in the third quarter. He said his company is testing the drug for 20 other diseases.

Lee noted that Fannie Mae ( FNM) CEO Michael Williams has resigned. CNBC reporter Diana Olick, who spoke with Williams, said he felt it was the right time to leave. He said he was doing so now to give the board enough time to find the right CEO. He called his job demanding and frustrating.

In a segment on short squeeze candidates, Terranova said investors should be alert for stocks with a large short interest. He cited that reason for getting into Netflix ( NFLX) last week (the stock had a short interest of 18%) and why he believes US Steel ( X) with a 23% short interest, looks interesting.

Tim Seymour agreed the elements for a short squeeze are evident in US Steel, with hot-rolled steel prices up, auto sales on a record run and housing poised to improve.

In the final moves, Seymour liked Vimpel Com ( VIP). Nathan advised cautiously bullish investors to consider a stock replacement strategy that involved selling their stock and buying some calls. Finerman favored Mastercard ( MA), while Terranova liked State Street ( STT).

-- Written by David Tong in San Francisco.

>To contact the writer of this article, click here: David Tong.

To submit a news tip, send an email to: tips@thestreet.com.

To watch replays of Cramer's video segments, visit the Mad Money page on CNBC.

Follow TheStreet.com on Twitter and become a fan on Facebook.

More from Jim Cramer

Jim Cramer's Investing Rule 14: Expect, Don't Fear Corrections

Jim Cramer's Investing Rule 14: Expect, Don't Fear Corrections

CVS, Walgreens and Citigroup: Cramer's 'Off the Charts'

CVS, Walgreens and Citigroup: Cramer's 'Off the Charts'

Sirius XM Radio, Molson Coors, MSCI: 'Mad Money' Lightning Round

Sirius XM Radio, Molson Coors, MSCI: 'Mad Money' Lightning Round

Who Are the Trade War Victims?: Cramer's 'Mad Money' Recap (Tues. 6/19/18)

Who Are the Trade War Victims?: Cramer's 'Mad Money' Recap (Tues. 6/19/18)

REPLAY: Jim Cramer on How to Navigate the Stock Market Amid Tariff Worries

REPLAY: Jim Cramer on How to Navigate the Stock Market Amid Tariff Worries