'Fast Money' Recap: No Explanation for Thursday's Market Rally

NEW YORK (TheStreet) -- Wednesday's stock market rally wasn't much of a surprise because of the Federal Reserve's comments, but Thursday's 2.4% rally in the S&P 500 has "no explanation," Karen Finerman, president of Metropolitan Capital Advisors, said on CNBC's "Fast Money" TV show.

Nothing has really changed, agreed Brian Kelly, founder of Brian Kelly Capital. Oil hasn't recovered and high-yield bonds didn't trade that well, despite ending the day higher by 0.7%. He doesn't "trust" the stock rally and bought put options on the HYG. 

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The stock market can still enjoy a "Santa Claus rally," according to Steve Grasso, director of institutional sales at Stuart Frankel. However, it will be very hard for stocks to trade higher in the longer term, if crude prices don't rally as well. 

The huge stock rally over the past two days isn't that surprising because everyone seemingly thought the market was headed lower, said Tim Seymour, managing partner of Triogem Asset Management. The U.S. dollar is headed higher and will put pressure on emerging markets and commodities. 

There's been a "huge" divergence between the S&P 500 and the energy sector, with the S&P climbing 5% and energy falling 20% in the past six months. According to Paul Hickey, co-founder of Bespoke Investment Group, that doesn't spell doom for the market. 

In fact, the stock market generally has a flat to slightly higher return when this type of divergence occurs, which has happened 16 times in the past 50 years among all 10 S&P 500 sectors, Hickey said. The underperforming sector, on average, returns a positive return 60% of the time over the next three, six and 12 months. Longer-term investors will likely be rewarded for buying energy stocks. 

Finerman added that she is long Seadrill (SDRL) and recently initiated a small long position in the Market Vectors Oil Services ETF (OIH) . Kelly said investors could consider a long position in Exxon Mobil  (XOM) if they believe oil will rally. 

Grasso, who is long Southern Company (SO) , finds it interesting that utilities continue to perform so well despite it being a defense sector. Utilities are up 24% on the year. 

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Shares of Nike (NKE) slid 3% in after-hours trading, despite beating on top- and bottom-line estimates. The quarter was good, said Sam Poser, managing director at Sterne Agee. However, with the stock up almost 20% from its previous earnings report, the results needed to blow investors away in order for the stock to move higher. 

Business in China and Europe was stronger than most expected, he added. Nike has been capitalizing on the popularity of athletic clothes and shoes, a cycle Poser says really took off in 2010 and will likely run through 2016. The company continues to do a  great job, but the stock is likely "dead money for a little while," he concluded. Poser has a "neutral" rating on the stock. 

The bar seemed to be set too high for Nike, said Seymour. The stock is likely to trade between $94 and $99. It's somewhat expensive based on valuation, but he is staying long. 

Nike is a great company, but Finish Line (FINL) and Foot Locker (FL) are more attractive based on valuation, according to Finerman. Foot Locker has a strong balance sheet and great execution, she added. 

Colin Langan, director and auto analyst at UBS, has a neutral rating and $230 price target on Tesla Motors (TSLA) . Tesla has great technology for batteries and its cars, but its time horizon is for the very long term.  Battery costs need to fall in order for a cheaper, mass market car to come to market, but the huge fall in oil prices isn't sitting well with investors. 

Shares of Tesla need to climbed above $233, the stock's 50-day moving average, in order to be considered a buy, Grasso said. Seymour added that shares are headed to $180. 

For their final trades, Grasso is buying Dish Network (DISH) and Seymour is selling the iShares MSCI Emerging Markets ETF (EEM) . Finerman is a buyer of Foot Locker on a decline and Kelly said to buy the Market Vectors Gold Miners ETF (GDX) . 

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-- Written by Bret Kenwell 

Follow @BretKenwell

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