Signs of a Sustainable Rally?
In anticipation of Goldman Sachs settling the government's civil fraud charges, investors gave the stock market a big, last-hour turnaround Thursday. It was that unexpected event that helped recover losses, but as Cramer has maintained since June 2, six important things need to happen before a rally can be sustainable. The negatives, he said, are being checked off.
The Oil Spill Must Be Stopped
Earlier this week, Cramer expressed "total confidence" that BP could shut down the Gulf leak. It was confirmed Thursday and as a result, the market rallied and shares of the London-based company pushed higher.
"The blow out-induced malaise may at last be lifting," he said. "It's a big deal, a vital part of the recipe for the market to rocket off the lows."
Spanish Banks Stabilized and Euro Holds
Cramer has said it is important for Europe to stabilize, the euro to strengthen and the Spanish bank situation to improve. He notes that in one day, a "hugely successful" Spanish bond auction prompted the euro to rally. At the same time, he noted that because the Spanish banks own so many Spanish bonds, there is fear that those financial institutions would be stuck with those "losing investments." But those government bonds are now "coming back to life."
FinReg Reform Finalized
Before financials can push higher, Cramer has said it's important to see the fine print of financial regulation. Moreover, there was fear that financial regulatory reform wouldn't actually get done, but it did. Cramer had been concerned that FINREG might do damage to bank earnings, but after listening to JPMorgan Chase's "excellent earnings" reported during a conference call Thursday, he is now less worried about earnings risk.
"The simple fact is that the market despises uncertainty and we have put to rest the biggest uncertainty that could affect this incredibly important cohort of the market," Cramer said.
But a settlement in the US Securities and Exchange Commission's case against Goldman , where the New York City-based financial institution agreed to pay a record $550 million in fines, was cause for optimism late in the trading day and after the closing bell. The rally was a "true sign of relief" because the firm didn't have to admit guilt, which could have led to billions in civil suit losses, Cramer said. For many on Wall Street, he said, the settlement is yet another sign that the Obama administration is "extending an olive branch to business."
"I think the government's recognizing that without the help of business it can't create the jobs it needs to turn this economy around and it can't get businesses help with an agenda that antagonizes so many companies and freezes hiring in this country," he said.
Cramer said that when you get a truce in the "biggest battle between government and business" and with the negatives getting crossed off, "you just can't keep this market down even after one of the most remarkable runs I have ever seen in 30 years of investing."
Cramer's charitable trust owns JPMorgan Chase.
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