Ben Bernanke: The Market’s Savior?

Ben Bernanke’s stellar performance on Sunday’s 60 Minutes cheered Wall Street enough to push the Dow up 167 points, Cramer said, before profit taking brought the index back down. Who knew the Federal Reserve chairman, in Cramer’s view a one-time enemy of the market, would become its greatest champion?

Remember, this is the same Ben Bernanke who refused to cut interest rates in fear of inflation, despite being faced with a landmark deflationary spiral. This is the guy who refused to open the Fed discount window when banks were in desperate need of capital. At the time, he seemed completely oblivious to the market’s problems, much to shareholders’ detriment. So it’s no wonder Cramer was screaming, “They know nothing!”

But that changed last night.

Bernanke was loud and clear with his message: The U.S. will grow without inflation. The economy will turn up soon, maybe as early as this year. And the financial crisis will be solved without nationalizing the banks. In just one interview, the Fed chair changed the tone on Wall Street.

As a result, transports like CSX and Norfolk Southern rallied. So did soft-goods companies like Procter & Gamble and Heinz . Most importantly, though, the banks moved higher, particularly those trading in the single digits. This virtuous circle of events, as Cramer called it, should continue to build, with more and more good news enticing buyers back into the market and pushing it higher.

The banks, of course, are especially important. No rally is sustainable without them. So the fact that Bank of America and Wells Fargo are up signals a change for the better. It’s true these institutions have had problems, such as unwieldy acquisitions, but Bernanke’s statements seem to have put people’s fears at ease. When BAC and WFC now announce that they’re profitable, we believe them, rather than thinking bad loans would do them in. And with the return of the uptick rule for short selling and a change in mark-to-market accounting, Cramer said the banks should get back on their feet. That means the rally will continue.

Looking for a way to trade it? Cramer recommended the beaten-up financials: Citigroup, BAC, US Bancorp, Blackstone and Wells Fargo. He called it “the Bernanke basket” of stocks. This group might trade down on Tuesday and Wednesday on profit taking, he said, but investors should get back in by the end of the week.

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