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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