Two of the “most-hated sectors” are making a comeback, said Jim Cramer on CNBC’s “Mad Money,” namely technology and the industrials.
“The key to any rotation is having a group of stocks that’s so beaten down that when the companies merely 'do the numbers,' they go higher,” Cramer explained. “When you have a really incredible rotation, like we saw today, you get the most astonishing thing imaginable — companies deliver shortfalls or guidedowns and then have big moves up anyway because people are way too negative.”
The technology sector was helped by an earnings report from Intel. Many investors were very negative on Intel going into the quarter, Cramer said. Judging from the headlines, the chipmaker reported a shortfall and cut its forecast, Cramer said. But upon closer review, Intel was bullish about the fourth quarter. In turn, the tech giant was the best performer on the blue-chip index.
Elsewhere in the tech space, Cramer said EMC’s stock has been struggling lately. Investors were worried about the stock, so the company released a statement saying they are not going to beat the numbers, but just make them. By tempering expectations, Cramer noted the stock rallied.
In the industrial sector, Honeywell International rallied after the conglomerate posted a 12-percent earnings gain, thanks to strong demand in the U.S. trumped weakness in Europe.
Meanwhile, Stanley Black & Decker’s stock was initially hammered after the hardware company reported a “monster shortfall,” Cramer said. After reading past the headlines, though, investors saw that its tools business roared. They also learned that it boosted its dividend, Cramer added.
(RELATED: Cramer's Top Dividend Stocks)
So as there was rotation into tech and the industrials, Cramer noted there was rotation out of the banks.
Bank of America tumbled even after the financial giant reported earnings that beat Wall Street's expectations, becoming the fifth big bank in a row to beat estimates. Fellow financials Goldman Sachs and Citigroup both topped estimates earlier in the week. Rival Morgan Stanley is scheduled to report earnings Thursday.
In Cramer’s opinion, it remains to be seen just how long this rotation will last. It supports the long-time Cramer maxim, though, that “there’s always a bull market somewhere.”
—CNBC.com contributed to this report
When this story was published, Cramer's charitable trust owned EMC.
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