U.S. stocks closed near their best level in thin trading Thursday, with the S&P 400 index rallying to the 1,400 level. If you ask “Mad Money” host Jim Cramer, the gains were a result of several sectors roaring back to life.
“During the first quarter we saw tremendous gains in homebuilders, banks and high-rolling expensive technology stocks. And then they just died,” Cramer said. “The whole month, you couldn't touch them.”
Things have started to change, though.
Take PulteGroup, for example. The No. 2 U.S. homebuilder posted a narrower quarterly loss and the biggest jump in new orders in seven quarters, in the latest sign of a U.S. housing market recovery. The company's shares rose more than 5 percent after Pulte said it sold more homes over the previous year and its orders rose 15 percent for the quarter ended March 31. This stock had earlier been left for dead, Cramer exclaimed. But as Pulte’s stock rose, so did the housing index, which makes Cramer “feel right” about the housing bottom.
Elsewhere in the market, the banks seem to be turning the corner, too. Cramer thinks financial institutions are reflecting possibility of increased loan demand. If demand for loans goes up, the interest rates will go up, too. Banks want higher interest rates because it’s essentially one of the few ways they are able to make money. To be specific, banks profit from something called net interest margin, which is the difference between what they pay you for your deposits and what they make on each loan. So if interest rates remain low, banks will have a harder time making money.
“Banks need rates to go higher, not lower,” Cramer said. “I think the idea that higher rates could be down the road is what's behind this rally, especially when it seems likely the Fed won't do anything to keep rates down if they start going up.”
To Cramer, the financials is one of the most undervalued groups in the market. He is bullish on several financials, including American Express, JPMorgan Chase, U.S. Bancorp and Wells Fargo.
Meanwhile, the technology stocks have taken off, too.
Equinix, a cloud computing company, saw its stock rocket 19 points higher Thursday. Cramer said that kind of move is typically associated by news of a takeover, but not this time. Citrix Systems, another cloud play, also saw big gains. CTXS jumped 9.5 points from $77 a share to $86.76 a share. Cramer thinks Salesforce.com could soon push higher, too.
So what’s the bottom line?
“The laggards of April are now leading,” Cramer said. “They've relaxed, they've recharged. Now they are roaring and you haven't missed a thing. In fact, these moves may just be a harbinger for something even bigger.”
—Read on for Cramer: The Best Run U.S. Companies
—Reuters contributed to this report
When this story was published, Cramer’s charitable trust owned American Express, JPMorgan Chase and U.S. Bancorp.
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