Investment guru Jim Cramer proclaims that it’s pretty much a miracle that the stock market “pretty much shrugged off” a major oil-production shock.
“It’s amazing how the averages pretty much shrugged off such a major [oil production] decline,” Cramer said on CNBC’s “Mad Money”.
“So there were real areas of weakness, but the truth is this market held up incredibly well,” he saids after the major indexes fell less than 1% following drone attacks on Saudi Arabia’s oil facilities.
“In the old days, the averages would’ve plunged on this kind of oil shock,” he said.
U.S. stock index futures edged lower on Tuesday as the focus shifted away from weekend bombings on Saudi Arabia’s main oil refinery to the Federal Reserve’s two-day policy meeting, where it is widely expected to cut interest rates, Reuters said. Oil shed some of its gains on as the United States raised the possibility of releasing crude reserves.
Meanwhile, defense stocks rose on the market after President Donald Trump tweeted the U.S. is “locked and loaded” to respond to the attack, which the White House has blamed on Iran.
“I know this stock market’s resilience could melt if the White House decides to make an all-out strike against Tehran,” Cramer said. “But, man ... it’s amazing how the averages pretty much shrugged off such a major [oil production] decline, something that would’ve been totally impossible to even think about a decade ago, and that’s worth keeping in mind,” he said.
There was strength in secular growth stocks, which don’t require a strong global economy to perform, Cramer said. ServiceNow, Workday, VMware and Adobe all gained more than 3%. Lockheed Martin, Raytheon and L3harris Technologies, which all rallied as much as 3.7%, could benefit from military investments as governments seek to expand radar to prevent future drone attacks, he added.
“So there were real areas of weakness, but the truth is this market held up incredibly well,” the former hedge fund manager said. “In the old days, the averages would’ve plunged on this kind of oil shock. I know because I’ve lived through a bunch of them, starting in 1973. We’d be freaking out about surging inflation, and gas lines, and a huge decline in consumer spending.”
Meanwhile, Brent crude oil, the international benchmark, fell 1.78% to $67.79 per barrel on Tuesday. On Monday, it surged as much as 14.6% for its biggest one-day percentage gain since at least 1988.
U.S. West Texas Intermediate futures were down 1.70% to $61.85 per barrel following a 14.7% surge on Monday, the biggest one-day gain since December 2008, Reuters reported.
Saturday’s attack on Saudi oil facilities has halved the kingdom’s oil output, creating the biggest disruption to global oil supplies in absolute terms since the overthrow of the Iranian Shah in 1979, International Energy Agency data show.
Trump has authorized the release of emergency crude stockpiles if needed, which could ease some upward pressure on crude futures.
Trump said on Monday it looked like Iran was behind the attacks but stressed that he did not want to go to war, striking a slightly less bellicose tone than his initial reaction.
Iran has rejected U.S. charges that it was behind the attacks. Tension between the two countries was already running high over Iran’s suspected ambitions to assemble nuclear weapons. The strikes in Saudi Arabia are likely to raise regional tensions further.
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