As bond yields rise, Jim Cramer dismisses fears of inflation in turbulent stocks

The debt market continued to weigh on the stock market on Thursday, triggering another brutal liquidation that particularly hurt growing names, said CNBC’s Jim Cramer.

“The bond market sees the economy getting ready to reopen … and concludes that the last thing we need is more stimulus,” explained the host of “Mad Money”. “For these bond investors … this is like throwing gas at Kingsfords. They think the economy is going to overheat … [and that] we will have serious inflation. “

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

The Dow Jones Industrial Average and the S&P 500 also suffered heavy losses, leaving investors with little opportunity to make gains that day in the market. The blue-chip index fell nearly 560 points to close at 31,402.01, down 1.75%. The benchmark fell 2.45% to 3,829.34.

Concerns about rising inflation scared investors, leaving the high-growth names for another day this week. Earlier this week, Federal Reserve Chairman Jerome Powell again pledged to bring the federal funds rate to levels close to zero to help the economy out of the pandemic-induced crisis. Elsewhere in Washington, the Biden government is trying to court lawmakers to approve a $ 1.9 trillion coronavirus relief package, which has also sparked fears of a rising consumer price index.

Inflation weighs on the currency and the purchasing power of the consumer.

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

“And they pull hard on high-growth stocks that pay a high price in times of inflation,” he explained. “It happened today.”

The market’s decline has consumed every corner of the industry. All 11 S&P indices were in the red at the close, with the discretionary consumer and technology segments falling more than 3%. Of the 30 shares in the Dow index, only Merck, Johnson & Johnson and 3M managed to have a positive trading day.

Apple, Boeing and Salesforce were among the biggest losers at the time.

Disclosure: Cramer’s charity fund has shares in Apple, Salesforce and Boeing.