Cramer says markets are dangerous now, we need technical stability

Read Time:2 Minute, 53 Second


The tech fiasco isn’t much reflected in the price-weighted Dow Jones Industrial Average because of the strength of bank stocks this year, CNBC’s Jim Cramer said Monday.

Cramer said the damage done to the market by the banks is completely overshadowed by the banks compared to the Nasdaq and the S&P 500, making the Dow very good, which has more large-cap tech stocks. The Dow is only measured by the average price change of its 30 stocks, with four major financial firms among its minority members (Goldman Sachs, JPMorgan, Travelers and American Express. Visa is also average, but the stock is more consumer-dependent economic activity is higher than interest rates.)

The S&P 500 and Nasdaq extended losses for five straight sessions on Monday, falling about 2% and more than 2.5%, respectively. The Nasdaq fell 4.5% last week. The S&P 500 fell nearly 2% last week.

As Cramer pointed out, the Dow has been better of late, falling just 0.3% last week. However, blue chips on average fell more than 500 points, or nearly 1.5%, on Monday, dragged down by losses in Nike and Visa. The Dow and S&P 500 both hit all-time closing highs early last week, before rising 10-year U.S. Treasury yields clouded stocks.

Overall, stocks — especially growth stocks, many of which are tech — don’t hold much value in an environment of rising interest rates. However, banks make more money when interest rates are higher, which has been driving gains in 2022.

“I find this market to be dangerous. We need some stability from the big tech companies. And we don’t have it yet,” Cramer said on “Squawk on the Street.”

The S&P 500 information technology index, which includes some of Silicon Valley’s biggest names, has fallen about 7% so far this year, according to FactSet. During the same period, the S&P 500 financial index has gained about 4% so far this year. All sectors of the S&P 500 fell on Monday. Financials and energy stocks had been in the green shortly after the open before reversing lower.

Tech stocks won’t get any help Monday from the 10-year Treasury yield, which once again topped 1.8%, its highest level since January 2020. The rapid rise in interest rates reflects expectations that monetary tightening measures are in progress or are being implemented. US Federal Reserve. As interest rates rise, investors are dumping tech stocks as their future earnings are now worth less, making the group’s high valuation harder to justify.

Goldman Sachs expects the Fed to raise interest rates from near zero four times this year as inflation rises and U.S. unemployment falls. In the minutes of its December meeting released last week, in addition to signaling a rate hike and confirming an accelerated reduction, the Fed also revealed discussions about shrinking its balance sheet.

Investors this week are hoping for more clarity when Fed Chairman Jerome Powell testifies at a Senate committee nomination hearing on Tuesday. Consumer and wholesale inflation reports are due on Wednesday and Thursday. Earnings season also begins this week, with quarterly results on Thursday and quarterly results from JPMorgan Chase, Citigroup and Wells Fargo on Friday.

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