David Tepper tells Cramer he's covered his Nasdaq short, thinks selling could be ending

Published Tue, May 10 20229:07 AM EDTUpdated Tue, May 10 202210:20 AM EDT

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

Legendary hedge-fund manager David Tepper believes "the sell-off could be concluding," the founder of Appaloosa Management told CNBC's Jim Cramer on Tuesday. "I was talking to my friend Dave Tepper, who's been short," Cramer said on "Squawk Box," before the opening bell, following another day of broad declines on Wall Street. "He came in, covered his short on the Nasdaq . Again, he is a trader. He feels that the sell-off could be concluding," Cramer reported. "What he really is focused on, if we get down to [S & P 500] 3,600 to 3,500, he's not going to be a trader. He's going to be an investor." Tepper also told Cramer that he feels that "the forced sellers have equaled bottom, and that it really is a great time to be able to take a shot." Reflecting on his Tuesday morning chat with Tepper, Cramer said: "This is a major change for him. I speak with Dave quite a lot, and I know he's been very, very negative, so this is a big trading cover. And if it goes down more, he wants to go long." "He is a trader, but I think it's worth noting that he's a great trader," Cramer said, alluding to some of Tepper's timely moves throughout the years, perhaps most notably his call about the Federal Reserve in 2010 that sparked the so-called "Tepper rally." Last week, Tepper told CNBC's Scott Wapner he thinks central banks, including the Fed, have "a little bit of a credibility problem," as inflation runs hot both in the U.S. and other economies. Tepper specifically criticized Fed Chair Jerome Powell' s comments that dismissed increasing interest rates by 75 basis points in a single meeting. The fresh insight into Tepper's thinking Tuesday morning comes after the S & P 500 on Monday reached its lowest level since March 2021 . The broad U.S. stock index closed down 3.2% at 3,991.24, while the technology-heavy Nasdaq Composite sank 4.29% to settle at 11,623.25. Tepper believes 12,000 is an important level for the Nasdaq, according to Cramer. "Nasdaq, he thinks, holds at 12,000," Cramer said, explaining that Tepper believes the index will trade back above 12,000 and stay there. "That's why he wanted to cover," Cramer said. "He thinks it goes higher." Tepper's thoughts on yields A rapid rise this year in Treasury yields, and inversely a decline in prices, has contributed to the stock market volatility. Traders have been selling bonds, which pushes up yields, as the Fed tightens monetary policy in an attempt to tamp down inflation, which is particularly bad for bonds. The benchmark 10-year Treasury yield has been above 3% in recent days, reaching its highest level since late 2018, with traders of late doubting whether the Fed can bring inflation under control in a timely fashion. On Tuesday morning, it had pulled back, though, to trade around 2.97%. Cramer said Tepper had also been short bonds — betting that they would fall in price — but has since exited that trade, as well. "He covered his bond short, so I mean, obviously he thinks they overshot," Cramer said, adding Tepper expects the 10-year yield to hover between "2.9% to 3.2%." ( See here for a full list of the stocks in Jim Cramer's Charitable Trust portfolio.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

David Tepper

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