Cramer: Corporate US Faced with a Tale of Two Cities
We live in both the best of times and the worst of times for corporate America, Jim Cramer said Thursday on CNBC’s “Mad Money.” Unfortunately, right now there are far more worst times than best times. Today, U.S. markets saw declines for a sixth-straight day, with the Dow Jones losing 31 points at 12,573, the S&P edging down fractionally to 1,334 and the Nasdaq giving up 0.75 percent to close at 2,886.
To put it poetically, “we’ve had a spring of hope when the averages were still rallying, and now we’re facing a winter of despair,” Cramer said. He was referring to widening global fears brought on by the U.S. fiscal cliff, a potential hard landing in China and “European death rattles,” in addition to some lackluster corporate earnings.
Still, he said, there’s enough positive action going on to offset the economic slowdown and there is still money to be made.
For instance, several sectors are facing the best of times — like utilities, REITs, telecom companies and a handful of retailers. This morning, when the markets opened in the red, several stocks — AT&T, Verizon, Wal-Mart Stores and Target among them — stood their ground. In fact, both Wal-Mart and Target are up more than 17 percent for the year.
Food, beverage, tobacco and drug companies are also giving us a “summer of hope,” he said. That’s how companies like Johnson & Johnson, Procter & Gamble andMerck have all managed to perform so strongly in spite of any bearish sentiment. And even within sectors, we are faced with drastic dichotomies. While German consulting and software company SAP can rally $1.68 on fast-growing IT spending, the India-based firm can plummet 11 percent while citing IT weakness. We see a similar dynamic between Dunkin' Brands and Starbucks.
And then there are the worst of times.
Globally, products are suffering from a lack of demand. This “season of darkness” is especially evident among oil — once considered an inelastic staple commodity — and a number of other industries. Gas prices have fallen as a result of better cars and a weaker world economy, and many oil service companies are in a state of constant decline.
Computer sales have been “crushed,” and not all of it can be blamed on Apple. Luxury and non-discretionary retailers alike are slowing down. And businesses like Dow Chemical, Caterpillar, Alcoa, Ford Motor and General Motors are now being punished for expanding beyond U.S. borders.
Tomorrow, the banks will tell us whether there’s sufficient demand for the most important commodity out there — money — and if there isn’t, Cramer said the market will get crushed. “We have to see some demand for credit,” he said. “Without it, we aren’t going to get the much-needed growth in employment that can turn the worst of times into better ones.”
(RELATED: Cramer’s 5 Recession-Resistant Stocks)
So, what’s the bottom line?
“It is a Dickensian market,” Cramer said. “There’s stuff to like and stuff to avoid. There’s positives and there’s negatives, and that’s why this market doesn’t get pulverized into smithereens every single day we come into work, as so many people expect to happen.”
Read on for Cramer’s 10 Stocks You Might Have Overlooked
When this story was published, Cramer’s charitable trust owned Apple.
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