CNBC's Jim Cramer on Monday gave advice on how to approach the stock market after news of progress on a coronavirus vaccine sent the recovery stocks rallying and the stay-at-home stocks retreating.
"I think you have to be prepared for a multiday sell-off in the Covid names," the "Mad Money" host said. "These stocks have had huge gains. They're ripe for profit-taking."
Travel and leisure stocks such as Carnival and Wynn Resorts, two companies that were rocked by restrictions put in place earlier this year in response to the coronavirus crisis, surged double digits in Monday's session. The stocks rallied hard on early data on a vaccine study from Pfizer and BioNTech, showing it to be 90% effective in preventing Covid-19 transmission.
Carnival was the biggest gainer on the S&P 500, which rose more than 1.17%. Along with a boost from the election being called for Joe Biden, investors traded on hopes that the country could be turning a page as multiple drugmakers test out potential vaccines. The U.S. is now recording more than 100,000 positive Covid-19 tests a day.
The Dow Jones Industrial Average catapulted more than 800 points for its biggest gain in five months. The Dow and S&P both hit new records.
"We were headed higher, anyway, thanks to certainty about who won the election," Cramer said, "but the Pfizer news represents a new chapter for the market that justifiably sent some stocks soaring."
The stay-at-home trade, which includes companies associated with activities such as remote work and online shopping, plunged on the vaccine update. The tech-heavy Nasdaq felt the pain as it dropped 1.53% during the trading day. It was the only major average to end the session in the red, snapping a five-day win streak where it rose 9%.
"I expect the reopening plays to keep climbing, while the Covid winners get hammered for the rest of the week, but some of the reopening plays should be sold into strength," Cramer said, "while the better Covid names will be worth buying into the weakness that you'll see by week's end, if not before then."
Online marketplace Etsy tanked more than 17%, and Netflix tumbled more than 8% during the session, among the biggest losers on the S&P index. Lockdown darlings Zoom and Peloton, both up triple digits in 2020, plunged about 20% on the vaccine news.
Clorox shares, which have grown almost 27% year to date, also tanked more than 10%.
"You have my blessing to sell some," Cramer said of the stay-at-home stocks, "but don't sell them all, because we still need to make it through a brutal winter with no vaccine."