CNBC’s Jim Cramer on Tuesday said investors should not panic about February’s “truly pathetic” housing starts number because the market is primed to bounce back.
Single-family home construction declined 8.7 percent last month to a 1-1/2-year low, but housing forecasts are looking better as mortgage rates decrease. The housing market is not flashing recession signals, he said.
“Don’t be afraid of the hideous housing numbers. Be aware that this is a natural decline, which I think will be followed by an advance that you can profit from as housing enjoys its annual spring rebound,” the “Mad Money” host said.
Cramer predicted home building will be stronger in March. The Federal Reserve’s rate hike in December, despite Cramer’s objections, made home prices and mortgages more affordable, and raw materials costs have fallen faster than housing prices, he said. The decrease on 10-year Treasury yields is also a “godsend for the industry,” he added.
More on housing here
Wall Street needs to see more mergers and acquisitions come through before the “coming onslaught” of initial public offerings jams up investing capital, Cramer said.
Major U.S. indexes traded strong out the gate Tuesday, but gave up most of their gains before the close. The Dow Jones Industrial Average added more than 140 points in Tuesday’s session. The S&P 500 and tech-heavy Nasdaq both gained about 0.70 percent.
“I think part of it is that we’ve got too many stocks,” the host said. “So with a bunch of new IPOs on the horizon, the market won’t be able to handle all the supply. And when supply outstrips demand, prices go lower.”
Lyft will list on the Nasdaq Friday. AirBNB and Uber plan to go public this year, and Slack, Palantir, and WeWork could join the fray as well.
“I think the FAANG stocks will be used a source of funds,” he said.
But big tech is not the only sector that the host is worried about. He said the oil, cloud, health care and transports sectors, among others, are too crowded and need some consolidation.
“I wouldn’t be this concerned about the lack of mergers if I weren’t so worried about the coming onslaught of IPOs,” he said. “If money managers want to participate in these deals—and they will—they need to sell stocks that they already own to raise money … and that’s gonna put pressure on the whole market.”
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Cramer took a look at chart patterns, as interpreted by Carolyn Boroden, to understand why the technical analyst is warning it might be time to get cautious at current market levels. Boroden, who makes stock predictions at FibonnacciQueens.com and is a Cramer colleague at RealMoney.com, looks for repeating action on the S&P 500 and has concerns that the market run since December could reverse in the next two weeks, Cramer said.
The S&P is in good shape, according to Boroden, but her Fibonacci methodology indicates there cuold be some rollover, he said.
“That’s why she wants you to watch the action in the S&P and watch the 5-day and 13-day exponential moving averages, just in case they flash a warning sign telling you it’s time to ring the register,” Cramer said. “All I can say is: nobody ever got hurt taking a profit.”
Take a look at the chart analysis here
Electronic Arts gave up some popularity to Fortnite, the online battle royale video game from Epic Games.
The stock is down less than 20 percent from this point last year and off more than 30 percent from its all-time high last July. But the gaming company has hit the reset button, climbing nearly 30 percent thus far in 2019.
“After spending months as Fortnite’s punching bag, Electronic Arts has jumped on the battle royale bandwagon with Apex Legends and this one hugely popular game has turned the whole story around,” Cramer said. “That’s why the stock caught fire. That’s why the stock has more room to run.”
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Five9, a cloud software provider for contact centers, is changing the way that call centers work for businesses, CEO Rowan Trollope told Cramer. If a customer has a bad experience calling, texting, or emailing a business, it’s likely the company is using a legacy hardware, on-premises system, he said.
Instead, Five9 can scale up and scale down call loads on the cloud with buying additional infrastructure to handle peak call hours, Trollope said.
“It is a totally radical departure from what has been in the past and what we enabled those companies to do is to deliver a great experience whenever you call or email or text every single time,” he said.
Catch the full interview here
In Cramer’s lightning round, the “Mad Money” host sprinted through his reaction to callers’ stock picks:
Fiat Chrysler Automobiles NV: “No, no. We’re not a buyer of any auto company, although I invite [Tesla CEO] Elon Musk to come on during the oral argument, because I know he follows me very closely. Elon, you’re welcome.”
Camping World Holdings Inc.: “The stocks not that profitable. But, you know what—I think that this stock is bottoming and I say that because I think camping is going to make a comeback and that those inventories are lean. I am, I feel very lonely in that position, but i do feel that way.”
Blackstone Group LP: “I like this stock. This is [CEO] Steve Schwarzman. I think he’s done a good job. You’re banking with him. I’d rather be buying with him than to be banking against him. I’m gonna say yes.”
Disclosure: Cramer’s charitable trust owns shares of Apple, Amazon, and Facebook.
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