Two faulty narratives are behind the massive breakdowns in the technology sector, CNBC’s Jim Cramer said Tuesday after reports surfaced that the FAANG stocks had lost more than $ 1 trillion in value.
Amazon and Google parent Alphabet, two FAANG members, Cramer said.
“The idea that the data center’s a spent force has been deadly to the whole sector,” he said on “Mad Money” as tech dragged on the broader market. “It’s the new narrative that refuses to go away regardless of all the evidence to the contrary, and there’s a lot of it.”
Meanwhile, the reaction to Amazon and Alphabet’s middling quarterly results delivered the “uppercut that knocked the whole group” off its feet, Cramer said. Since then, the bear market in tech has been raging, unassailable by even positive news from individual companies.
“We’ve entered a world where good news is irrelevant and bad news is all that matters,” Cramer warned. “I don’t see how tech can give you a sustainable rebound without some hard evidence that the data center’s OK or that its weakness is purely overcapacity and not a slowdown in demand from the cloud. Until then? You’ve got to wait until the knives are done falling.”
Federal Reserve Chair Jerome Powell is now equipped to pause the central bank’s interest rate hike agenda after December thanks to this debilitating sell-off, Cramer said Tuesday.
“Today’s sell-off gives Fed Chief Jay Powell the cover he needs to raise interest rates one more time next month and then put the next few hikes on hold,” said the “Mad Money” host, who supports the widely anticipated December hike.
Cramer came up with eight reasons for the Fed to stop its plans, which the Federal Open Market Committee has suggested will include three more hikes over the course of 2019. Cramer has warned that raising interest rates in lockstep could derail U.S. economic growth.
Click here for the list.
Extreme volatility in the energy market could be one of the less obvious causes of the stock market’s broad-based sell-off, and there could be more pain to come, Cramer warned as the Dow Jones Industrial Average erased its gains for the year.
“You can’t understand this breakdown in the stock market unless you recognize that we’re seeing some spillover from the carnage in the oil futures,” he said after consulting with his top commodity expert, Carley Garner.
“You have tons of money managers with staggering losses in, say, the oil futures,” Cramer said. “If their investors want out or they just need to raise capital to meet the broker’s margin calls, they need to sell something, and that often is stocks.”
Oil prices fell sharply Tuesday on fears of a supply glut and a slowing economy, with U.S. West Texas Intermediate crude hitting a one-year low. Crude futures have dropped dramatically in the last month as U.S. crude prices plunged as much as 30 percent from a four-year high.
Click here for the rest of Cramer and Garner’s analysis.
Siri may not be living out its full potential under Apple’s wing, but voice-enabled assistants are nevertheless the future of digital technology, Siri’s co-founder and former CEO Dag Kittlaus told CNBC on Tuesday.
Since Apple acquired Siri in 2010, “on the positive side, it’s a lot faster, the speech recognition’s gotten a lot better, but they dropped the ball on a couple things like opening it up to third parties,” said Kittlaus, now co-founder and CEO of Viv, an artificial-intelligence company acquired by Samsung in 2016.
On the whole, voice assistants today are used in “very basic” ways, Kittlaus told Cramer in an interview. Most consumers use them for setting alarms or reminders, but the potential for them is huge, he said.
Click here to watch and read more about his interview.
Cramer also sounded the alarm on dividend stocks — securities with high yields that investors often flock to when they fear a slowdown.
“This strategy of hiding in dividend stocks only works if you’re confident that the dividend itself is safe, that it won’t be cut by management in the not too distant future,” he said. “Even if you only have a mild suspicion that the payout might be in jeopardy, … it’s not worth the risk.”
The stock of CenturyLink, which has an 11.7 percent yield — the largest in the S&P 500 — is one such name that’s not worth the risk, Cramer said.
The company, an old-school telephone and data service provider, “kind of feels like a dinosaur” in the new age of communications, the “Mad Money” host said, adding that he was concerned about its declining revenues.
“I can’t recommend CenturyLink … for a number of reasons,” he said. “The main one is I don’t have enough faith in the dividend. Anytime you see a stock with a double-digit yield, that’s an enormous red flag, people. It says many investors simply don’t believe the company will be able to maintain its payout, and here’s one where I’ve got to go with the crowd.”
In Cramer’s lightning round, he fired off his take on callers’ favorite stocks:
Crown Castle Intl.: “The best one [in the 5G space] is Qualcomm. It’s got the same yield as Crown Castle. You do have a lot of volatility involving Apple. 5G, I think, is two years away. I’ve been trying to recommend Broadcom and Qualcomm, but I just can’t tell you to do it yet ’cause it’s too far.”
Alibaba Group Holding Ltd.: “If you’re Vice President [Mike] Pence, you want to make it so that they’re not the biggest e-commerce play on the planet. You want to take them down. And that’s why I will recommend no Chinese stocks, because when you have a vice president [who] wants to take down the stock market in China, why should I recommend a Chinese stock?”
Disclosure: Cramer’s charitable trust owns shares of Facebook, Apple, Amazon and Alphabet.
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