NEW YORK (TheStreet) -- After trading lower early Wednesday the S&P 500 reversed course and had its best one-day performance in 2014 following reassuring comments from the Federal Reserve.
On CNBC's "Fast Money" TV show. Pete Najarian, co-founder of optionmonster.com and trademonster.com, pointed out how well the financial sector performed during the morning selloff and afternoon rally. He likes railroad companies, railcar manufacturers and airline stocks on the long side.
Brian Kelly, founder of Brian Kelly Capital, said he would rather buy small-cap stocks than transport stocks. The Fed will stand by the U.S. economy for longer than previously expected, he added. Investors should stay long.
Guy Adami, managing director of stockmonster.com, said the market did not pull back by as much as he had anticipated. Investors need to "respect" the strong reversals that many stocks and indices had on Wednesday.
Karen Finerman, president of Metropolitan Capital Advisors, said she added to some of her long positions before the market rallied. She exited some, but not all, of her long CBOE Volatility Index (VIX.X) position, which was being used a portfolio hedge.
So far, everything is going to plan for Ford's new F-150 pickup. However, investors should be prepared for "reasonable uncertainty" in the future if anything goes wrong. He said 90% of the company's profits come from this vehicle. Overall, he has a more bearish view of the U.S. auto market than most other analysts. He also cited deflation as a risk to U.S. automakers.
Najarian said he likes shares of Tesla on the long side but is using options to play the move higher in order to limit his risk. Finerman is long General Motors and said it has been a painful ride. She is concerned about the potential "peaking" of the auto stocks. Adami said investors can go long shares of Ford with a stop-loss at $14.
Kelly said investors should consider taking some profits in shares of Alcoa (AA) after the company beat on top- and bottom-line estimates.
Neely Tamminga, an analyst at Piper Jaffray, has a neutral rating on Gap (GPS) with a $46 price target. She said Gap's new CEO, Art Peck, will be good for the company because he will focus on digital search. The company had weaker-than-expected sales and gross margins for September, which is something investors should monitor. She has a buy rating on shares of J.C. Penney (JCP) with a $13 price target because she thinks the company is going to continue taking back market share and has good gross margins.
Adami said J.C. Penney does not deserve the same type of valuation as a company like Macy's (M) . However, its price-to-book value is below many of its peers, giving the stock a nice risk/reward setup on the long side near current levels.
Finerman argued that Macy's might have a higher price-to-book value than J.C. Penney but its gross margins are higher. Just because the stock price is cheap doesn't mean J.C. Penney is cheap based on valuation.
Paul Hickey, co-founder of Bespoke Investment Group, said the number of negative-to-positive revisions for the upcoming earnings season is the most negative it's been since the second quarter of 2012. Historically, when negative sentiment outpaces positive sentiment the stock market tends to exceed expectations.
In those scenarios, the S&P 500 is positive 80% of the time with the average gain being 2% and the median gain being 4%. For the bulls, negative sentiment is better going into earnings season, historically. Two stocks Hickey expects to bounce are Transocean (RIG) and Lockheed Martin (LMT) .
Adami said he is a buyer of Lockheed Martin over Transocean.
Kelly agreed with Adami, but said he also likes the Energy Select Sector SPDR ETF (XLE) and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) on the long side. WTI crude oil seems likely to bottom soon.
Marc Andreessen, co-founder of Andreessen Horowitz Investments, said the breaking up of large technology companies is "a major trend" that will continue over the next five years. These companies are too undervalued, and splitting up will unlock some of that value.
He added that large companies are looking to get smaller via breakups in order to adapt to the rapidly changing industries in which they operate. Investors need to understand that breaking up a company is a difficult and long process, not one that happens overnight.
Andreessen said he continues to like Twitter (TWTR) because the business is growing incredibly fast and management continues to do "amazing things." Bitcoin is building out a global payments network that has a ton of potential in the future. He is not worried about the price of the bitcoin currency because he is focused on the technology and infrastructure. He likes the "smart watch" concept but is not sure if it will gain traction right away.
Kelly said the technology in bitcoin has a lot of room to grow while the bitcoin currency seems to have support somewhere near $300. Najarian said the technology sector appears undervalued.
Alethia Young, biotechnology analyst at Deutsche Bank, said shares of Arrowhead Research (ARWR) seem oversold near current levels. The firm maintained its buy rating but lowered its price target to $20 following the release of its Phase II results for its Hepatitis B drug. The company has a presentation on Nov. 10 that should provide more details on the treatment.
Kelly said the volatility is too hard to stomach for many individual biotech names. For that reason, investors should consider buying the iShares Nasdaq Biotechnology ETF (IBB) or the SPDR Biotech ETF (XBI) if they want exposure to the industry.
Najarian said investors who are buying "high-risk, high-reward" biotech stocks should consider using options as a way to limit risk. Adami said he continues to be a buyer of Gilead Sciences (GILD) .
-- Written by Bret Kenwell in Petoskey, Mich.