As tensions between the U.S. and Iran cooled, CNBC’s Jim Cramer said Wednesday’s massive rally revealed which stocks investors should be buying as conditions stabilize and which to avoid.
“When you go through these lists of the best and worst performers, you can see what’s worth owning when things calm down and what’s untouchable,” Cramer said on “Mad Money” Wednesday.
“When the market gets hammered again, you know what the professional money managers will reach for. It’s a great way to figure out what can take you higher and what’s just a plain old dead end,” he added.
Cramer’s commentary came after stocks soared on the news that President Donald Trump announced the suspension of U.S. attacks on Iran for two weeks. The pause signals some relief in a five-week conflict that led to Iran closing the Strait of Hormuz, which is a critical waterway for global energy supplies. To be sure, Cramer said questions still remain about the durability of the ceasefire and all of the details that need to be ironed out in a longer-term agreement.
Nevertheless, The Dow Jones Industrial Average rose 2.85%%, while the S&P 500 gained 2.51% and the Nasdaq jumped 2.8%. West Texas Intermediate crude fell over 16% to $94.41 per barrel, while Brent crude for June delivery dropped roughly 13% to $94.75 per barrel.
Among the Dow’s biggest winners during Wednesday’s rally were Sherwin-Williams, Caterpillar, Home Depot and Goldman Sachs, Cramer pointed out.
“That’s a pretty extraordinary set of leaders,” Cramer said. “When you see these four going up, it means investors believe that interest rates are coming down.”
The 10-year treasury yield, which is tied to 30-year mortgage rates, also fell sharply Wednesday. Cramer previously said lower rates are key to reviving the stalled housing market and could support the broader economy while lifting stocks like Home Depot, which hit a two-year low Tuesday.
Caterpillar, which jumped 6.51% is another name that shows ” how terrific this market can be,” Cramer said. “It’s been such a horse because the company’s got multiple ways to win,” explaining this is another company that benefits from lower interest rates which make it cheaper to finance construction projects.
As for Goldman Sachs, Cramer cited multiple reasons to buy this bank’s stock as market conditions improve. “There will be a rush of deals as the [Trump] administration is incredibly pro dealmaking,” Cramer said. Goldman Sachs reports next week, and Cramer expects it to be good.
As for the losers in Wednesday’s relief rally, Cramer said it’s not surprising to see oil companies like Chevron and Diamondback make the list. The underperformance in stocks like Salesforce and Workday indicate that investors haven’t forgotten about AI disruption risks, Cramer said.
Other big decliners included plastic makers like Dow Inc, though Cramer cautioned that the disruptions to Middle East supplies may not be solved overnight.
“I’m not sure how easy it is to give up on these,” Cramer said.
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