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Investors React to Reports of Slowing China

What a difference a year makes.

In 2011, economic weakness in China meant U.S. stocks would fall across the board while investors took their money out of the market and into bond funds, “Mad Money” host Jim Cramer noted. Today, however, investors are simply rotating into parts of the market that have no exposure to China.

U.S. stocks closed in negative territory Thursday, on track to log its worst week this year, as economic concerns over China overshadowed a better-than-expected jobless claims report. Investors were on edge all day following a report that showed China's manufacturing sector activity slumped in March for the fifth-straight month. In turn, investors sold any China-related plays, such as the minerals, miners and machinery companies. Cramer doesn’t think that’s necessarily the right move, though.

“I wouldn't be surprised if the burgeoning U.S. market ends up being able to offset China, so while everybody who's dumping Caterpillarmight be right tomorrow, I bet they'll be wrong in a couple of quarters,” Cramer explained.

Investors rotated out of China-related names and technology stocks and invested in high-end apparel retailers, dollar stores and restaurants, Cramer said. The rotation allowed the market to finish in the much better place than it otherwise would have, he continued. He doesn’t think the rotation is over either.

—CNBC.com and Reuters contributed to this report

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