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Stay-at-home stocks suddenly came back in style, Jim Cramer says

The stay-at-home stocks that benefit from the coronavirus pandemic led the stock market higher as investors continued to grapple with the spike in cases in dozens of states, CNBC’s Jim Cramer said Thursday.

“When the state of Texas was forced to pause its reopening plan because of record Covid infections … suddenly the stay-at-home stocks come back in style and it took up the whole market,” the “Mad Money” host said. “Many of today’s winners were the usual suspects that benefit from the pandemic.”

The major averages all advanced more than 1% during the session in a reprieve from a major sell-off the day prior.

As Covid-19 cases soared in the American South and West, Texas Gov. Greg Abbott announced Thursday that he is putting the state’s reopening plans on pause as officials battle increasing hospitalizations. Renewed concerns over the virus’ spread brought the market down at the open, but the S&P 500 reversed course to finish the day up 1.10% at 3,083.76.

“The truth is we’ve been through this before and we know that lots of stocks benefit from the re-emergence of the stay-at-home economy,” Cramer said. “There are 100 companies in the Cramer Covid-19 Index … Collectively, the stocks are worth now $12.2 trillion. That’s up from a cool $11 trillion when we put this list together back in April. The entire S&P 500 is only worth $25.2 trillion.”

The oil stocks also contributed to the positive trading day as the price of crude bounced. The bank stocks also lifted, though the move seems to be ephemeral, Cramer said.

Bank stocks jumped on news that the Federal Deposit Insurance Commission would ease guidelines laid out in the Volcker Rule, a rule spurred by the Great Recession that regulates how financial institutions invest in venture capital and other funds. That, however, was later countered by new restrictions by the Federal Reserve requiring big banks to suspend their stock buyback programs and cap dividend payments for the third quarter in efforts to prevent capital at numerous banks from falling to concerningly low levels due to impacts from the pandemic.

“Stay away from the banks,” Cramer said.

The Cramer Covid-19 Index, populated with stocks that have benefited from the lockdown, outgained the three major averages Thursday, gaining 1.5%.

As investors put more money into the pandemic plays, stocks like McCormick, Clorox, Etsy and Shopify were able to rally, Cramer said. Pantry, e-commerce, work-from-home and mega-cap tech stocks have been some of the biggest beneficiaries of coronavirus response measures.

With the economy still in a precarious position, Wall Street managed to advance because of federal action, the host said.

“In a normal environment, one where we just let the economy happen, so to speak, the stock market would’ve collapsed today,” Cramer said. “But the Federal Reserve is determined to keep the bankruptcies as low as possible.”

Disclosure: Cramer’s charitable trust owns shares of McCormick.

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