The banking sector will set the tone for earnings season when the group begins delivering quarterly results on Friday, CNBC's Jim Cramer said Thursday.
"The banks are the group that sets the tone for earnings season, and that's a lucky thing because this time their stocks are coming in ice cold, which means that they should be able to rally on even the slightest positive provocation," the "Mad Money" host said.
Investors are trying to anticipate the results, Cramer said. The Dow Jones Industrial Average shaved off about 14 points and the Nasdaq Composite lost more than 16 points. The , however, was virtually unchanged during the session.
"The fear is palpable that earnings could be down year-over-year, but no one wants to leave the table because stocks are still the only game in town," he said. "Even though we've had a real slowdown since the Fed's last rate hike, the alternative to stocks — the bond market — once again offers only paltry returns."
Cramer revealed what he expects to hear from the major banks:
J. P. Morgan Chase: Chase reports before the market open on Friday. The stock is up $15 from its December lows. Cramer recommends buying the premier bank while its at a 3% yield. CEO Jamie Dimon could have good news for shareholders, Cramer said.
Wells Fargo: Wells Fargo will also report quarterly results Friday morning, and it could be a better buy than J.P. Morgan with its share price up just about $4 per share from its December lows, Cramer said. The $47 stock price is cheap, trading at nine-times earnings with a 3.8% yield, he said. Although the bank has been operating under an interim CEO since Tim Sloan's departure last month, the host suggests buying in before a permanent CEO is installed.
"As a devotee of Tim Sloan, the now-retired chief executive who fell on his sword to protect the company from bad PR, I've gotta say, it's not like he quit when the going was tough. He has left his successor with a clean bank that's returned to growth in a very short period of time," Cramer said. "You're going to hear that Warren Buffett, the bank's biggest shareholder, likes the new choice and that's gonna bring in buyers."
Goldman Sachs: Goldman Sachs plans to give its earning report Monday morning. Cramer expects the investment bank will reveal an "amazing number" that won't budge the stock, which closed less than $203 on Thursday. The Malaysian fraud scandal and corresponding fines need to be resolved before the share price can climb back towards $262, Cramer said, but it's hard to believe that it will plummet on bad news. It could be worth owning.
Citigroup: Citigroup will come out with results before the market opens Monday. The bank has fallen into a habit of missing numbers and buying back stock, Cramer noted. Shareholders want to see that Citigroup can still grow, he said.
Bank of America: Bank of America is slated to release its latest earnings prior to the bell on Tuesday. Cramer noted the stock is $2 off its 52-week high. The bank would have to deliver a huge upside surprise for it to rally, and the security is at 10-times earnings, which is more expensive than most of its peers, he said.
Morgan Stanley: The investment bank will present its quarterly earnings before the market opens Wednesday. Cramer said this one has the most potential to surprise investors with good numbers. He has faith in the CEO.
"CEO James Gorman has gotten this place humming after a less-than-stellar previous quarter," the host said. "I have rarely seen a chief executive who seems more motivated to crush the numbers this quarter than this man."
Disclosure: Cramer's charitable trust owns shares of JP Morgan Chase and Citigroup.