The Dow turned in its best one-day gain since the Great Depression, but it’s far from the quality rally that investors want to see, CNBC’s Jim Cramer said Tuesday.
“A good rally is one that’s stair step. It goes up nicely, people don’t believe, then it flatlines and goes up again,” the “Mad Money” host said. “A bad rally, an unsustainable rally, is like a one-day mini bull market. A run that gives you all the gains” you’re going to get.
Stocks advanced robustly as Congress inched closer toward finalizing an economic stimulus package, the third coronavirus response measure that’s been taken up this month. The blue-chip Dow Jones index surged roughly 2,113 points, or 11.37%, to 20,704.91. The S&P 500 followed with a 9% gain and the Nasdaq Composite realized an 8% run during the session.
Cramer likened the rally to how the market reacted to Congress’ passage of the bank bailout, which came on a second vote, during the 2008 financial crisis.
On Sunday, Senate Democrats stopped a massive funding package from advancing, lodging complaints that it included too much help for distressed businesses and not enough aid for workers. In a one-on-one with Cramer Tuesday morning, House Speaker Nancy Pelosi said there was “real optimism” behind discussions, signaling that a deal could soon be reached.
The stimulus package is expected to be over $1 trillion.
“Consider it a geyser,” Cramer said, referring to the market’s response to the developments. “It went off, but it might not go off again for who knows how long, because this sure ain’t old faithful. It’s machine-driven.”
The economic stimulus bill is said to include about $350 billion to assist small businesses through the health pandemic and as much as $2,400 in direct payments to married couples and $500 per child. Republican and Democratic Senate leaders are at odds over administering a roughly $500 billion bailout of corporations.
The stimulus package would help “tide us over” until the American workforce will be back at full operation, but there’s more coronavirus headwinds on the horizon, Cramer said. The rally won’t be sustainable until the outbreak is put to an end, he said, explaining moves his charitable trust ActionAlertsPlus.com made.
“We sold some shares in companies that may be seriously impaired by the interregnum,” he said. “We want to be ready if our COVID [diagnoses] go up, and I’m certain that they might continue to go up and that this things is more at the beginning than the end.”