Cramer: Ugly Duckling Stocks Becoming Beautiful Swans
Remember those stocks you said you wouldn't touch with a ten foot pole? Soon, you may want to roll around in them.
Jim Cramer thinks a new and somewhat under the radar economic data point could trigger a big rally in US stocks -- stocks that have otherwise been left for dead.
Ironically, that critical piece of data came out of China.
Specifically, a Chinese Purchasing Manager's report came in at 50.2 up from 49.8 the previous month.
Of course that begs the question – with so many other important economic data points such as housing prices and jobless claims – why would an increase of 0.4% in some index out of China matter to American investors?
"Because the Street had feared that China had become a big disappointment and wasn't going to turn around any time soon, certainly not in time to help 2012," said Jim Cramer.
But now - this single data point suggests the game has changed.
The Street takes China's PMI to mean "China may have bottomed," said Jim Cramer. "That's why the stock market rallied so fiercely."
Although the S&P rallied the most in seven weeks, Cramer was most impressed by the gains in industrial and material stocks that had otherwise fallen out of favor – names such as Caterpillar, Freeport McMoRan, and Cummins.
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"When you get a number that breaks the fall of an economy, like the one from China, it breaks the gloom and busts the doom. That's what we got, and in return so many of the industrials that had looked like ugly ducklings, turned into beautiful swans," said Cramer.
But it doesn't stop there. Cramer was also impressed by the price action in tech.
Remember those stocks you once said you wouldn't touch with a ten foot pole. Soon, you may want to roll around in them.
"It looks as if China's coming roaring back to life," said Cramer. "I expect PMI to be the first in a long line of positive numbers. "
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