'Fast Money' Recap: Waiting for the Fed

NEW YORK (TheStreet) -- The broader market closed near the highs of the day ahead of the statement from the Federal Reserve at the end of the FOMC meeting Wednesday.

On CNBC's "Fast Money" TV show, Guy Adami said the Fed has to do something at this point. He is expecting $10 billion to $15 billion in bond tapering. He added that Caterpillar ( CAT) looks like a good short.

Brian Kelly concurred on Caterpillar and added that the risk-to-reward for holding large positions into Wednesday's FOMC meeting are not favorable.

Jim Lebenthal is a Caterpillar bull, but said he wouldn't be surprised to see some profit-taking.

Karen Finerman said she's not trying to trade around the Fed since it is too hard. She added that what she owns now she'll likely want to own in a month from now, regardless of the Fed.

Mike Khouw said that with Fed Chairman Ben Bernanke stepping down soon, he would be surprised if some sort of tapering was not initiated. However, he did say the economic numbers have not been that good and inflation hasn't moved much.

Jon Hilsenrath of the Wall Street Journal was a guest on the show and said the Fed is in a pickle because of its forecasts of both lower unemployment and low interest rates. In a healthy economy, the two do not typically coexist, he suggested.

He added that the Fed doesn't want to upset the market, which may or may not cause the central bank to taper, since the market seems to expect about $10 billion per month in tapering efforts. Many Fed officials are on the fence.

Adobe ( ADBE) reported earnings and Adami said he would rather be taking profits than buying the stock.

Even though Qualcomm ( QCOM) is near a 52-week high, Adami said he still considers the stock a buy.

Lebenthal called it a cash machine and thinks it will rip right through $70 to the upside. Kelly added that if that happens, $100 per share is not out of the question.

General Motors ( GM) announced it was working on a long-range electric car that is $50,000 less than Tesla Motors' ( TSLA) Model S, making the former stock an ideal fit for the show's "Street Fight" segment.

Finerman defended General Motors, saying that she has seen a remarkable rebound in the auto market that hasn't ended yet. She added that the stock is cheap, Europe is rebounding and the K2XX platform should increase earnings.

Kelly argued that car buyers have been hanging on to their cars longer than they ever have before, over 11 years on average. He added that people don't have to buy cars anymore and car prices used to be cheap relative to income but are no longer. He also said the company's pricing power has peaked.

Lebenthal said there's no way that General Motors can compete with Tesla, but is bullish on auto sales and specifically, truck sales.

Aeropostale ( ARO) was the first stock on the show's "Pops & Drops" segment and Finerman said she would wait before initiating a position.

U.S. Steel Corp. ( X) jumped higher on Tuesday. Adami said steel stocks will likely keep running.

Pandora ( P) jumped 5%. Lebenthal said it's a positive sign when a stock rallies after a secondary offering.

Herbalife ( HLF) popped 4% and Khouw said the proposed $2 billion leveraged share buyback could really squeeze the shorts.

Mosaic ( MOS) fell 1%. Kelly said he would avoid the fertilizer space.

Adami said the price action in Microsoft ( MSFT) was disappointing, considering the announced $40 billion buyback program and 22% increase to the dividend.

Kelly added that short-term traders could look to short the stock and use Tuesday's high as the stop.

Lebenthal said that with all the stock buybacks occurring, it tells him that a peak in the stock market is not around the corner.

John Netto, president of M3 Capital, was a guest on the show and suggested that equity markets will likely sell off on Wednesday on the news of tapering. He added that the biggest part of Wednesday's action will be the market's interpretation of the Fed's actions. Netto said he is long the S&P 500, thinks gold is in trouble and views a selloff as a buying opportunity.

Kelly said that if the Fed cuts any of the MBS (mortgage-backed securities) purchases, then the market will, without a doubt, react negatively.

FedEx ( FDX) will report earnings on Wednesday and Adami said he wants to stay long into the event.

Oracle ( ORCL) also reports earnings on Wednesday and Lebenthal said the stock should not disappoint this time around.

For their final trades, Kelly was a buyer of United States Natural Gas ETF ( UNG) and Finerman said to trim long positions in Disney ( DIS). Adami was buying Apache ( APA), Lebenthal liked BP PLC ( BP) on the long side and Khouw said to sell covered calls if you've been long Herbalife.

-- Written by Bret Kenwell in Petoskey, Mich.

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Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter. Focuses on short-to-intermediate-term trading opportunities that can be exposed via options. He prefers to use debit trades on momentum setups and credit trades on support/resistance setups. He also focuses on building long-term wealth by searching for consistent, quality dividend paying companies and long-term growth companies. He considers himself the surfer, not the wave, in relation to the market and himself. He has no allegiance to either the bull side or the bear side.

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