On Monday, China slashed its 2012 growth target to an 8-year low of 7.5 percent. Chinese Premier Wen Jiabao said he hopes to reach the target by following proactive fiscal and prudent monetary policies to combat downward pressure on growth and still high inflation.
Slowing growth in China overshadowed better-than-expected economic news in the U.S. In turn, the Dow Jones industrial average slipped 14.76 points, or 0.11 percent, to close at 12,962.81. The S&P 500 index lost 5.30 points, or 0.39 percent, to finish at 1,364.33 while the Nasdaq slumped 25.71 points, or 0.86 percent, to end at 2,950.48, logging its biggest drop this year.
“Mad Money” host Jim Cramer said he isn’t too worried about the sluggish Chinese economy and how it caused stocks to fall Monday. After all, the Chinese government is recommending that consumer consumption grow, which could mean it might be building more McDonald’s, Starbucks and the like. He also doesn’t believe that China is going to crash land, even though that was the talk at many trading desks Monday. Finally, he pointed out that the U.S. economy is going from bad to good and that’s just as important as China’s economy going good to so-so.
“We're so down on ourselves and our economy in this country that I genuinely believe if you asked people around this country which economy was the biggest and most important, many would simply shrug their shoulders and say China,” Cramer complained. “But we shouldn't be so down on ourselves as to miss the big score.
“If oil can calm down, then I think that China can engineer a soft landing, that European countries can keep from defaulting and that the United States can continue to grow stronger.”
So what’s the bottom line? Cramer thinks the concerns about China are overblown. This rally is overbought and unsustainable, which is a positive because it allows capital goods stocks to rest while other stocks finally get a chance to shine.
—CNBC.com and Reuters contributed to this report
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