Playing Market Rotation, Small Caps' Big Rally, Double Whammy For Chips 7/17/24

Jim Cramer (0:00)

It's Jim Cramer here. You're listening to the opening bell of CNBC's Squawk on the Street. Don't miss a minute of the action.

Carl Quintanilla (0:07)

Good Wednesday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Jim Cramer, David Faber's back in post nine of the New York Stock Exchange. Futures under some pressure as the street begins to consider just how turbulent this rotation might get. VIX above 14, first time in six weeks. Earnings guidance a bit choppy too with JB. Hunt's spirit and five below. Our roadmap begins with the rotation in the market. Is the Russell 2000 still the star of the show?

David Faber (0:30)

Also ahead a double whammy for the chip sector this morning. We're gonna look at where the White House and former President Trump fit into that picture.

Plus a number of earnings to get to this morning, including market reaction to results from Johnson and Johnson.

Carl Quintanilla (0:43)

Let's begin with this market rotation after yesterday's 3.5% gain for the Russell. Jim, 12% in five days. That's gonna be the best run in about four years.

Jim Cramer (0:51)

It's a little unnerving because the stocks that are leading it tend to be stocks that have no earnings.

They're small.

They're all up 50% or more. I mean, you look at the top 10, we have such, we've got David Backs, we can go right to him. David, Prelude Therapeutics, Pacific Bio, Aurora Innovation, Caribou. I know, that used to be a coffee company. Lanthias, we know that's real. Cipher Mining, Method Electronics, Solaris Oilfield, IGN. That's the leaders of this. So should we just go all in, in this index that everyone says is the place to be?

David Faber (1:23)

Well, that is the question right now. Everybody wondering whether this can continue past what, an 11.5% move in the Russell 2000 over five days. We are now talking about, I think, a standard deviation in terms of move versus the S&P of some six, which is not typical.

As, of course, you'd expect, given that's the standard deviation move. But it's causing a lot of pain out there. There are those who were short the, if you're running a hedge fund, you may be short the Russell, in ways you're not even completely aware of.

It's parts of your portfolio. To your point, there are any number of smaller health care companies and the like that are certainly benefiting at this point. Not a lot of liquidity in the actual names in that.

Jim Cramer (2:04)

Thank you for saying that.

David Faber (2:05)

The index is one thing to buy, but the names themselves.

Jim Cramer (2:07)

Thank you for saying that.

David Faber (2:09)

It's very difficult to get in and to get out.

Jim Cramer (2:11)

Yeah, you know, these things are up. I mean, if you look at the parabolic moves, I mean, obviously, if you buy 25,000 shares of some of these, I mean, the size of these, the largest is 341 million, the largest gain.

And then you've got companies that are like Caribou that's 246 million, it's up 59%.

It has lost $1.38 last 12 months. And we're supposed to say, this is it. This is the move of a lifetime and you better get in. I think people have to be a little under the hood. And when they look at these, they say to themselves, well, listen, Allo Gene Therapeutics has lost $1.72. It's up 45%, 729 million. No, I am not gonna play this game.

David Faber (2:48)

But they're just, are they just buying the index? And that's it, right?

Jim Cramer (2:52)

Yeah, and there's no liquidity of the IDM. Thank you for mentioning it.

Carl Quintanilla (2:55)

Well, this is what Elaine Garzarelli was saying at the beginning of the year. In 94, when the Fed suggested that their tightening was ending, Russell went up 55% in 17 months.

Jim Cramer (3:05)

Well, we need to see a rotation within the Russell. We have these companies, now look, there are some very good companies in the Russell that are up 30%, but a lot of them are kind of like Hertz Global, which is up 30

Or Riot Platforms, that's a riot in itself. Generation Bio, Peekstone, really, but then again, you do have companies that are, not Alster, don't forget that one. You do have a lot of companies that are at the bottom of the up 20, 25, and they are real. Like Beezer Home is a real home builder, and the home builders were very strong yesterday, but for the most part, these companies are, they don't really resonate with the American people. So she may be right, but if these stuff go up that much, you want to short this market where they're being held. Because this is the big, this is a list of froth.