Wall Street showed it "has faith" in the sweeping stimulus bill that's pending passage in the U.S. Senate, but the plan does not resolve the health crisis at hand, CNBC's Jim Cramer said Wednesday.
The Dow Jones rose about 495 points, or 2.39%, to 21,200.55, the S&P 500 rallied 1.15% to 2,475.56 — the first two-day gain for both indexes in more than a month — and the Nasdaq Composite slipped 0.45% to 7,384.30. Still, the path to quell the coronavirus epidemic in the United States has yet to be cleared, the "Mad Money" host argued.
The legislation "won't create demand in a time when so many consumers are fearful, and it will not defeat the coronavirus," he said. "We've still got a long way to go, though, which is why I remain somewhat skeptical of this rally. I'm betting there will be many stocks that have to retest their lows, but many will hold those lows."
Cramer continued his calls for a "total lockdown" in the country to stop the spread of COVID-19, the deadly disease caused by the virus. Uncertainties about the global health and economic impacts of the coronavirus have led government officials to issue stay-at-home orders, businesses to close and the stock market to fall into a bear market at the fastest rate ever recorded.
Cramer is in favor of taking losses now to secure future prosperity, though President Donald Trump has aspirations to lift existing restrictions as soon as possible.
"Here's the crux of the problem: The economy can't fully recover until we squash this outbreak, but to crush COVID[-19] we need to take a huge short-term hit," the host said. "The bigger hit we take, the faster this will be over."
Wednesday's rally was stunted, however, after some senators emerged as detractors to the $2 trillion relief package in its current form. Four Republican senators came out against the emergency unemployment insurance provision. If they continue their opposition, said Sen. Bernie Sanders, I-Vt., he will delay the legislation in favor of tighter restrictions on $500 billion in government aid to corporations.
The Treasury Department would be responsible for distributing $500 billion in loans, loan guarantees and cash to distressed industries. Cramer said he is confident in the leadership of Secretary Steven Mnuchin, the former Goldman Sachs executive who would oversee the proposed program.
"That's why the market came roaring back after it looked like it was going to roll over this morning, with buyers flooding into the most economically sensitive stocks," the host explained.
"The stocks that won big today, at the peak, were the techs, the industrials, even the oils, and that tells you that the buyers believe that the government can bridge the gulf between now, when corona cases are still climbing, and later when the scourge is finally vanquished."