On CNBC's "Fast Money" TV show, Brian Kelly, founder of Brian Kelly Capital, said the Federal Reserve's monetary policy is what's driving the stock market. He does not think the market is ready to embrace higher interest rates.
Dan Nathan, co-founder and editor of riskreversal.com, said the current market does not feature robust jobs growth or revenue growth. He added that Wednesday could shape up to be a "sell the news" event and insisted that volatility is set to return to the stock market.
Guy Adami, managing director of stockmonster.com, said he was surprised by the S&P 500's big rally on Tuesday, as well as bonds closing lower. If rates are to stay low -- as reports suggest, which sent the S&P 500 higher -- then bonds should have rallied, he reasoned.
Karen Finerman, president of Metropolitan Capital Advisors, said she is in wait-and-see mode. She will buy some portfolio protection when the CBOE Volatility Index (VIX.X) drops below $12.
Paul Sankey, oil and gas analyst at Wolfe Research, said refinery stocks and exploration and production stocks are poised to do well. The demand for oil in the U.S. is strong enough, and that should help refiners going forward. His top picks include Marathon Petroleum (MPC - Get Report) , Western Refining (WNR) and Delek U.S. Holdings (DK - Get Report) .
Adami said investors can try taking a long position in Rackspace Hosting (RAX) but admitted that it could be a rough ride for the stock on Wednesday. Nathan and Kelly disagreed, saying they would not be buyers of RAX.
Ramon Llamas, mobile phones research manager at International Data Corp., said the possible delay for Apple's (AAPL - Get Report) iPhone 6 in China may not be that big of a deal, as long as it is released ahead of the Chinese New Year on Feb. 19. The fourth quarter is important in the U.S. but the first quarter is important in China when it comes to sales. Apple can't wait too long to release the phone because competition is moving fast for smart phones in the region.
Adami said he still thinks Apple is headed toward $88. Finerman said she is staying long Apple but is selling out-the-money call options to hedge her position.
SodaStream International (SODA) could sell itself for $40 per share to a British fund. Adami said it seems like the stock should have been higher on this news. He is a buyer of the stock at current levels. Finerman said a deal at $40 per share does not represent much premium. She would avoid the stock.
Liberty Media (LMCA) increased its stake in Live Nation Entertainment (LYV - Get Report) to 35%. Finerman said Live Nation is not cheap based on valuation, but is "under appreciated" as to how big it can be in the future.
Nathan said he is not a buyer of Pandora (P) near current levels. Kelly suggested that if the broader market begins a modest rally a stock like Pandora could outperform on the long side.
Jens Nordvig, managing director of currency research at Nomura Securities, said most investors seem to be expecting a dovish tone from the Fed Wednesday. However, Janet Yellen appears to be shifting to more of a neutral position rather than remaining dovish. He thinks that while the Fed won't be hawkish on raising interest rates at this particular meeting, an interest rate hike is eventually coming. The stock market is not yet prepared for that. He expects heightened volatility over the next few weeks in the equity markets.
Nathan agreed with Nordvig's assessment, saying that eventually interest rates will increase, as will volatility in the stock market. Kelly is long the U.S. dollar against the Canadian dollar.
VirnetX Holding (VHC) plummeted 44%, making it the first stock on the show's "Pops & Drops" segment. Finerman said she would avoid the stock.
Arch Coal (ACI) fell 3%. Kelly said, "I would just stay away from the coal space at this point in time."
Dick's Sporting Goods (DKS - Get Report) dropped 1%. Nathan said he does not understand why the stock has dropped 20% on the year because it has strong earnings and revenue growth as well as new management.
Adobe (ADBE - Get Report) missed on revenue and provided lower-than-expected guidance. However, Adami and Nathan were under the impression that shares could actually rally within the next several days, given that cloud subscribers increased during the quarter.
Nathan pointed out some bearish options activity in shares of GT Advanced Technologies (GTAT) . Specifically, someone sold 10,000 Oct. $17 put options for a gain and bought 17,000 more Oct. $12 put options. The position is likely being used as protection against a long position rather than acting as a sole bet to the downside, he added.
Adami said the selloff in GTAT seems overdone.
For their final trades, Nathan is a buyer of Apple put options and Kelly is a buyer EOG Resources (EOG - Get Report) . Finerman is a buyer of Darden Restaurants (DRI - Get Report) and Adami is buying Western Refining.
-- Written by Bret Kenwell in Petoskey, Mich.