Earnings season may be in full swing, but company numbers aren’t the biggest potential catalyst next week. That honor goes to the Massachusetts Senate race, once thought to be a lock for Democrat Martha Coakley but now a legitimate tossup between her and Republican Scott Brown.
“A Brown win would be devastating for the president’s agenda,” Cramer said, “particularly on health-care reform.”
And it could also boost the stock market.
If State Senator Brown beats State Attorney General Coakley, the Democrats will lose their 60-vote supermajority in the Senate. That would make it incredibly difficult for Obama to push through reform, Cramer said, and it may put a halt to House Speaker Nancy Pelosi’s seemingly anti-business agenda.
A Republican win would cause a “knee-jerk rally” in the health-care stocks, Cramer said, specifically the HMOs, drug companies and medical-device makers. He said knee-jerk because these companies, WellPoint and UnitedHealth specifically, have been pushing higher ever since the most potentially damaging parts of the legislation were removed.
More importantly, though, investors should react positively to a red victory in a blue state because it would signal a more business-friendly attitude in Washington. In fact, Cramer said a Coakley loss could spark a “gigantic rally” as everything from the banks to the oils face a less hostile government.
Such a move would be crucial, Cramer said, at least as far as the bulls are concerned. Two sector bellwethers, JPMorgan Chase and Intel, reported earnings on Friday, and investors reacted by taking down the indexes. With arguably lesser names on deck for next week, the bulls fear an even more severe reaction. So a rally would counter any potential losses.
Following JPMorgan, Citigroup, , Bank of America, Morgan Stanley , Wells Fargo , Goldman Sachs , Capital One Financial , American Express and Huntington Bancshares report next week. Cramer said he expects a subdued tone from the group, given that the last thing Washington wants is bullish numbers from these companies. After all, there’s little point to drawing still more negative attention (see: bank tax) from the feds.
The techs, on the other hand, should deliver a strong performance. Cramer expects good things from IBMon Tuesday, Seagate Technology and Skyworks Solutions on Wednesday and Advanced Micro Devices on Thursday. And Google’s strong quarter, also on Thursday, should at least for the moment overshadow the company’s recent troubles with China. In fact, Cramer said GOOG should produce a “colossal upside surprise.” Still, he thinks IBM will be best in show.
For a wider picture of the economy, investors should watch CSX on Wednesday. This rail company is exposed to autos, lumber, coal, chemicals, grain and fertilizer, all important gauges of American business. On Thursday, fellow rail Union Pacific will report, giving us an even better idea of how the US is doing.
Also on Wednesday, there’s Starbucks and Coach . Cramer said these stocks should sell off after reporting good numbers, as investors take profits following a run in both names. He’d recommend buying SBUX on the dip, though, particularly at $22, because the company is still in the middle of a turnaround.
Auto-parts maker Johnson Controls and oil-services firm Schlumberger announce on Friday. Cramer’s looking for them to forecast a strong 2010, which would in turn boost their respective groups. General Electric will report as well, and the conglomerate should offer a glimpse of the world economy’s health.
Finally, Cramer highlighted an IPO play. Symetra Financial is a small group health insurance company that could benefit if Brown wins the Massachusetts Senate seat. Either way, investors should try to get in on the offering, Cramer said, but especially so if Republicans come out on top. Warren Buffett is a partial owner here, and his presence is beneficial to every portfolio.
Cramer’s charitable trust owns Bank of America, Goldman Sachs, Intel, Johnson Controls and JPMorgan Chase.
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