CNBC’s Jim Cramer advised market participants have two ways to approach high-flying growth stocks that swarmed and staggered their way through an unstable session on Wall Street on Tuesday.
Investors may choose to participate in the sale, which has dropped some technical names like Apple in the negative trading area this year.
The second choice – to take a signal from Federal Reserve Chairman Jerome Powell’s repeated commitment to keep interest rates low ̵
“After today’s setback in the late afternoon, it’s not too late to sell the more seriously expensive stocks if you will,” said the “Mad Money” host. “But as for the better growth stocks that are more than 10% lower than their high levels, I call myself a buyer. Not all at once, not great, but a buyer anyway in any 9:47 clock test that we so today. “
Cramer’s assessment of the current state of the market follows a roller coaster trading day in which major US averages jumped from their session low. The market experienced a strong sell-off in the morning, with the Nasdaq Composite falling almost 4% at its trough before the blue chip Dow Jones and benchmark S&P 500 managed to etch modest gains at the close.
Dow advanced more than 15 points to 31,537.35 for a 0.05% gain. The S&P 500 ended 0.13% higher at 3,881.37 to end its losing streak of five. The tech-heavy Nasdaq could not muster enough for a positive day, falling 0.5% to 13,465.20, extending Monday’s losses.
“I like to entertain the idea that you should call the register here, but I like to have growth stocks in a reflection frenzy. I like growth stocks when the risk is on. I like growth stocks when the risk is. off, “Cramer said.
“If you want to hold on to the growth stocks … you need to be prepared to take some pain, just like in late 2015 and early 2016 – it was the last big moment to buy these stocks – or you can just sell something if you want and try to trade back at a lower level, ”he added.
The market has worked through a rotation as investors swap growth and technology stocks that surpassed the entire pandemic for value games at companies that are expected to see business returns when the economy reopens. Nasdaq is now 4.5% compared to closing time earlier this month.
Concerns that an inflation revival could cause the Fed to raise interest rates, as it did twice over a three-month period between 2015 and 2016, shook investors out of growth stocks in recent days, Cramer said. Higher rates pose a challenge for growth and supply stocks.
Stock prices in Apple, Salesforce and ServiceNow are all down at least 3% this week.
However, during a pre-congressional hearing on Tuesday, Powell told lawmakers that inflation remains “soft”, the labor market faces ongoing challenges and that the central bank was committed to its current monetary policy.
It reassured investors about interest rates, which helped the market recover some losses.
“This time, our Fed chief has promised to endure raising rates – for many unemployed – but there will come a time and point when these growth stocks will be somewhat hopeless,” Cramer said. “They just want to look like today … before people came in to buy.”
Correction: This story has been updated to reflect the correct number of points that Dow advanced with.
Disclosure Cramer’s charitable trust owns shares in Apple and Salesforce.
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