'Fast Money' Recap: Market Guessing Game

NEW YORK ( TheStreet) -- The markets rallied Thursday on encouraging economic data.

The Dow Jones Industrial Average soared 123.13, or 0.96%, to 12,904.08. The S&P gained 44.07, or 1.10%, to 1358.04. The Nasdaq added 44.02, or 1.51% to 2959.85.

The trading panel on CNBC's "Fast Money" TV show were divided on their opinions on where the markets are heading after today's rally.

Steve Grasso said the S&P, which has had trouble breaking 1356, looks poised to go above 1400. He said the key technical points to watch for will be 1370 on the way up and 1333 on the way down.

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

Keith McCullough, who shorted the S&P at 1357, thinks the market will be dragged down by an economic slowdown from rising oil prices, higher base material costs and a declining dollar.

Tim Seymour, though, said the market looks healthy. He said he was encouraged by today's jobless claims results as well as the European Central Bank's move to exchange Greek bonds. He said he is also seeing a rotation in the market to material stocks.

Guy Adami said it was a mistake for many to consider Apple ( AAPL) as a proxy for the market. He said the bulls will have to prove themselves to move above 1370, which he said has been hard to break though.

Steve Grasso said the market "could fall off the cliff" the next couple of months, as it tests 1257 and maybe 1200, to the downside. He said Europe could slip into a depression.

Melissa Lee, the moderator of the show, shifted the discussion to Microsoft ( MSFT), which hit a four-year high today.

Adami said today's 4.26% move was huge but cautioned against chasing the stock, saying it would be a "monumental mistake."

Adam Holt, a software analyst for Morgan Stanley, said the stock could run another $5 to $6. He said there were a number of catalysts driving the stock, including a possible rebalancing of the S&P to raise Microsoft's weighting to 2% from 1.8% as well as the potential success of Windows 8, improved margins, better cash distribution and an improved PC market outlook.

Shifting to the retail sector, Lee said Nordstrom ( JWN) was down after posting a decent quarter and guidance that was below analyst expectations.

Adami said Nordstrom has had a huge run but may be having troubles with its inventory build. He said a better bet at 10.5 times forward earnings is Macys ( M). He also liked JC Penney ( JCP), which he said is on the verge or breaking out to $50.

Erika Maschmeyer, an analyst with Robert W. Baird, said Nordstrom's bottom line was disappointing. But she said the retailer is taking steps to drive sales by making investments in ecommerce, managing inventory and getting a nice return on capital.

Meanwhile, Amazon ( AMZN) received a downgrade from Morgan Stanley on slowing sales growth.

Seymour said Amazon is a very expensive stock, adding investors would be better off in cheaper retailers and other online plays.

Lee noted that Baidu ( BIDU) was up after its earnings report topped expectations. Seymour said the stock may run into headwinds at $145 because it's hard to maintain growth at this level. Still, he said Baidu continues to grow and be a dominant player in China.

Lee brought in Zach Karabell to talk about the trend toward mobile pay. He said China is an untapped market for mobile pay, where only 5% to 10% of the 700 million mobile users use mobile pay. He said the companies that are in position to benefit from this trend are American Express ( AXP), Mastercard ( MA), eBay ( EBAY) and Verifone ( PAY).

Lee shifted the discussion to a report that Moody's may cut the credit ratings of a number of banks and securities firms, including Morgan Stanley ( MS) and Goldman Sachs ( GS).

Brad Hintz, an analyst with Sanford Bernstein, said the move is based on concerns about large derivative exposure and risk management. He said that while Goldman Sachs and JP Morgan ( JPM) could be brought down to single A, they remain among the best derivative players that exist.

He said Morgan Stanley may drop three levels on concerns about its fixed income business and its ability to deliver on its retail promise of reaching a 20% pretax margin.

In the final trades, Seymour said he loved the reversal in Freeport McMoRan ( FCX) and would play it with March calls. Adami liked Macys ahead of earnings. Grasso liked Altria ( MO), while McCullough said he was a seller of Hanesbrands ( HBI).

-- Written by David Tong in San Francisco.

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

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