After the debt ceiling deal, Dow may be ready to lead market
Last week’s debt ceiling resolution may have paved the way for a Dow resurgence, even though the index closed lower by about 200 points on Monday, according to CNBC’s Jim Cramer.
“With the default fears off the table, maybe this is a market where the once-mighty Dow can actually lead again,” Cramer said.
He noted that the Dow performed better than the tech-heavy Nasdaq on Friday, turning in its second-best day of the year. Although Cramer chalked up most of the Dow’s Friday success to the debt ceiling compromise, he also pointed out that the “Goldilocks” labor report and China’s stimulus package may also be factors.
Looking at a more Dow-focused market, Cramer highlighted several stocks that roared on Friday, including technology company 3M and construction manufacturer Caterpillar.
However, he cautioned against being greedy, saying, “the biggest money in this leg of the bull market has already been made.”
FAQs:
Who is Jim Cramer?
Jim Cramer is a financial journalist and host of the CNBC show “Mad Money.”
What is the debt ceiling resolution?
The debt ceiling resolution is a Congress-approved agreement to temporarily suspend or increase the limit on how much money the government can borrow.
What is the Dow?
The Dow Jones Industrial Average, or simply the Dow, is a stock market index that tracks 30 large publicly traded companies in the United States.
What is the Nasdaq?
The Nasdaq is a stock market index that includes mainly technology and growth-oriented companies. It is heavily weighted towards the technology sector.
What are the “Magnificent Seven” stocks?
The “Magnificent Seven” stocks are a portfolio of seven companies recommended by Jim Cramer as reliable and profitable long-term investments.
Market may see Dow take the lead post debt ceiling deal
CNBC’s Jim Cramer believes that last week’s debt ceiling resolution may have been a catalyst for a Dow Jones Industrial Average resurgence, even though the index closed lower by around 200 points on Monday. “With the default fears off the table, maybe this is a market where the once-mighty Dow can actually lead again,” Cramer said.
He added that the Dow performed better than the Nasdaq on Friday, turning in its second-best day of the year. With the exception of Tesla, most of Cramer’s “Magnificent Seven” stocks didn’t outperform on Friday like they have been doing so far this year, he noted.
The rally was significant not only because it was a huge run, but also because of its composition, Cramer said. Even when the Magnificent Seven take a breather after their tremendous gains, it turns out there are plenty of other potential winners that could power the next leg of the market’s move higher.
Although Cramer attributed most of the Dow’s success on Friday to the debt ceiling compromise, he also pointed out that the “Goldilocks” labor report and China’s stimulus package the previous week may have played a part. If it were not for the deal, the Federal Reserve might still be feeling pressure to pass steep hikes at their next meeting, which would disrupt the market, he added.
Looking at a more Dow-focused market, Cramer highlighted several stocks that roared on Friday, including 3M and Caterpillar. Cramer believes Caterpillar is largely misunderstood by Wall Street, and traders should not treat it like an old-fashioned cyclical stock. Instead, he noted that the company has been successfully diversified into a business that’s less reliant on the global economy.
Cramer is optimistic that 3M’s stock will perform well after the cancer-causing “forever chemical” ground contamination lawsuit the company faces is settled. He believes that the settlement will not bankrupt the company.
Overall, Cramer recommended caution and that traders should avoid greed because the biggest money in this leg of the bull market has already been made.