US-China Deal Will Send The Market Into an Epic Rebound, Says CNBC’s Cramer.

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CNBC’s Jim Cramer said that Tuesday’s stock market situation depicts what would happen if China and the US strike a deal, even if it is a bad one.

The Dow Jones Industrial Average advanced nearly 200 points, the gained 0.85% and the tech-heavy Nasdaq Composite improved 1.08%.

“Today’s rally was a reminder that if we do get any breakthrough in the trade talks whatsoever, you’re going to get an “epic rebound” the “Mad Money” host said. “Today may smack more of fantasy than of fact, but now you know what the market would feel like if President Donald Trump and the Chinese Communist Party can find a way to bury the hatchet. ”
Based on Tuesday, it seems unlikely that a deal would happen as both the countries are unwilling to compromise, Cramer said. Although, the American investors found a silver lining in the US Commerce Department’s decision to lighten the restrictions imposed on Huawei, allowing the American companies to fulfill the network and softwares of the Chinese company till August 2019.
Stocks that are caught up in a fix in the trade war got gains on the trading day.Chipmakers like Micron Technology and Xilinx rallied — 3% and 4.6%, respectively — on the news and buoyed the market. Shares of Qualcomm, Nvidia and Lam Research also expanded as much as 2.2%.

“You got a glimpse of what could happen if we just got a trade armistice,” Cramer said.

Cramer bought into notice that Huawei supplier Qorvo, which slashed its first-quarter earnings guidance by 15 cents per share Tuesday morning, was able to gain 0.44% during the trading day. The semiconductor company lost nearly $2 billion in market capitalization as a result of the earnings cut, he added.

“I think it’s already baked in, and more importantly, if the export ban ends up being delayed indefinitely, the stock could roar right back,” he said.

Boeing also hinted that there could have been a possible gain from the trading day. The recently troubled airplane manufacturer surged 1.69%.

“I think you could’ve had an even bigger move, maybe double, but the stock stalled out when a Wall Street Journal article published claiming that Boeing downplayed the doomsday scenario that led to the crash of Ethiopian Airlines Flight 302, ” Cramer said.

Apple’s shares crawled up to nearly 2%. Cramer said that the market and the investors expect the iPhone making company to be the biggest target of China as an expression of retaliation towards the US.

“This rebound is all about China. With Trump easing up on Huawei, the Chinese have an incentive to hold off on going after Apple. And if they never end up being targeted, well this stock could roar,” said Cramer.

Cramer warned the investors who are betting against Caterpillar, to be cautious about their actions and decisions as the company recently shot up its dividend to 20% and is now buying back a large number of stocks, which can reduce the stocks in the market and bolster the stock price.

“CAT’s levered to worldwide sales and, more important, earnings. This is not the old Caterpillar,” Cramer said. “CAT rallied today thanks to the de-escalation with China, but really it shouldn’t be trading in lockstep with China in the first place.”

 

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