Bullish on bank and industrial stocks, soft on tech

Don’t count on tech stocks outperforming as the second quarter kicks off, CNBC’s Jim Cramer cautioned on Wednesday.

“If you’re hoping that happy days are here again for tech, I’ve got some lukewarm news,” he said on “Mad Money.” “As the second quarter gets rolling, I think this market will become even kinder to the industrials and … the banks,” he said, “and even less hospitable to tech and health care.”

Cramer highlighted Cleveland-Cliffs as a potential winner in the second quarter. The stock shot up nearly 17% on Wednesday after the steel products supplier released preliminary results that were much stronger than expected.

Cleveland-Cliffs is an example of the companies that putting up numbers that are attracting money from big fund investors, Cramer said. These investors are also rotating away from tech stocks such as Amazon, Apple, Zscaler and ServiceNow. The four tech names are down more than 5% this year.

“Money managers don’t care about the most exciting long-term growth stories … they want the companies that can deliver the biggest upside surprises right here,” Cramer said. “In a booming economy, that means owning boom-and-bust cyclicals, like CLF, and not the stocks of companies that may represent future growth or may not, depending on their execution and the execution of their competitors.”

The moves are a part of the reopening trade as optimism grows about the economic rebound. Investors are shifting attention from the stay-at-home and remote-work plays of last year in favor of companies that will have more favorable year-over-year comparisons in their businesses.

“It’s not just that the industrials have better comparisons year over year, you’ve got that inflation issue. … As the economy gains momentum, that tends to produce higher inflation, inflation is devastating for fantastic [growth] companies,” Cramer said.

“Their stocks trade on potential earnings five to ten years down the road, but inflation means those future dollars have a lot less purchasing power, and those earnings are just eroded.”

Cramer’s comments came after Wall Street wrapped up the first quarter of 2021. The Dow Jones Industrial Average jumped more than 7% to start the year. The S&P 500 and Nasdaq Composite advanced 5.8% and 2.8%, respectively.

On Wednesday, however, the Dow slipped 85 points. The S&P 500 climbed 0.4%, and the Nasdaq Composite popped 1.5% in what Cramer called a “countertrend rally.”

Disclosure: Cramer’s charitable trust owns shares of Amazon and Apple.

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