As bond yields rise, Jim Cramer dismisses inflation fears roiling shares

The debt market continued to weigh on the stock market on Thursday, triggering another brutal sell-off that hurt the growth names in particular, CNBC’s Jim Cramer said.

“The bond market sees that the economy is preparing to reopen … and it seems that the last thing we need is more stimulus,” said the host of “Mad Money”. “To these bond investors … it’s like throwing gasoline at the Kingsfords. They think the economy is going to overheat … [and that] We’re going to have serious inflation. “

The yield on the 10-year US Treasury bill, a key rate barometer, was 1.6% on Thursday for the first time in a year. Meanwhile, the tech-heavy Nasdaq Composite fell 3.52%, its worst session since late October, to close at 13,119.43.

The Dow Jones Industrial Average and S&P 500 also suffered huge losses, leaving investors with few opportunities to make a profit in the market that day. The blue chip index lost nearly 560 points to close at 31,402.01, a decrease of 1.75%. The benchmark fell 2.45% to 3,829.34.

Inflation worries put investors off high-growth names for another day this week. Earlier this week, Federal Reserve Chairman Jerome Powell re-pledged to keep policy rates near zero to help the economy emerge from the downturn caused by the pandemic. Elsewhere in Washington, Biden’s administration wants to woo lawmakers to pass a $ 1.9 trillion coronavirus aid package, which has also sparked fears of a rising consumer price index.

Inflation is putting a strain on the currency and consumers’ purchasing power.

“In my view, Powell and Biden are doing the right thing. I don’t mind a little inflation every now and then,” but “Investors are selling bonds and pushing long-term interest rates up,” Cramer said. “When that happens, stock buyers back off. They always do.”

“And they’re pulling back heavily on high-growth stocks that pay a high price in times of inflation,” he said. “That happened today.”

The market decline has hit every corner of the industry. All 11 S&P sector indices were in the red at close of trading, with the consumer staples and technology segments falling more than 3%. Of the 30 stocks in the Dow index, only Merck, Johnson & Johnson and 3M had a positive trading day.

Apple, Boeing and Salesforce were among the biggest losers of the day.

Disclosure: Cramer’s charitable foundation owns shares in Apple, Salesforce, and Boeing.

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