Despite all eyes on the Magnificent Seven, CNBC’s Jim Cramer said that strong earnings results from companies in the “real economy” were responsible for Tuesday’s rally.
“We got some tremendous numbers from actual businesses,” Cramer said. “And I think we need to celebrate that so many companies not connected to the data center or artificial intelligence can be doing this well.”
The Magnificent Seven, which consists of tech megacaps Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla, makes up about 35% of the entire S&P 500.
Cramer acknowledged the large concentration of these tech giants can give some investors the impression that the market is “dangerous.” The same can be said for the major rallies this year in money-losing quantum computing and nuclear power companies, added Cramer, who deems that cohort of stocks too speculative to invest in. However, Cramer said there’s much more to the market than just megacap tech stocks and “high-risk speculative” names.
Cramer pointed to some “incredible earnings” on Tuesday for a relatively positive market, with the Dow closing up .47% and while the S&P 500 remaining relatively flat, although the tech-heavy Nasdaq did dip 0.16%.
Aerospace and defense company RTX Corp reported blowout quarterly earnings, which Cramer attributed to the firm’s complex military systems. GE Aerospace also put up “incredible numbers” in the last quarter for commercial jet engines and aircraft service.
Cramer highlighted 3M for putting up “superb” numbers after innovating 70 new products during the quarter, closing up 11.86 points or 7.66%.
General Motors saw a “terrific quarter” with its internal combustion hybrids showing to be more profitable than electronic vehicles, especially amid President Donald Trump’s “laissez-fair attitude” towards emissions, Cramer said.
Life sciences and diagnostics company Danaher, which rose nearly 6%, is finally looking up after an extended dry spell with positive earnings that indicate an even stronger year next year, he said.
Coca-Cola also exceeded expectations, which Cramer credited to CEO James Quincy for leading the company to offer new products which are selling well.
“When RTX and GE Aerospace and 3M and General Motors and Coca-Cola and Danaher are all delivering strong results, you know something’s going right,” Cramer said.
Clarification: This story has been updated to clarify which stocks Cramer deems “high-risk speculative” names.
