CNBC’s Jim Cramer examined Thursday’s market action, attributing the day’s brutal sell-off to the Federal Reserve’s decision to hold rates steady instead of making a cut.
“To me, today’s terrible action in stocks was a function of the Fed not cutting rates yesterday,” he said. “The slowdown in the economy, the brown shoots as I call them, has gotten much more palpable — they’ve turned into brown fields, with whole sectors starting to lie fallow.”
Although Fed Chair Jerome Powell indicated a rate cut was “on the table” in September, many on Wall Street feared that would be too late. Investors also were troubled by some frosty economic data, which combined to push the Dow Jones Industrial Average down 1.21%. The Nasdaq Composite fell by 2.3%, and the S&P 500 slid 1.37%. And after a significant rally over the past month, the small-cap Russell 2000 dipped 3%.
The 10-year Treasury dropped below 4% for the first time since February, and Cramer said this kind of action “speaks louder than words.” He said the bond market reveals a lot about the stock market, adding that the 10-year “is the sum of all our fears about the economy.”
But while he said the central bank is “always fair game for criticism,” Cramer suggested it doesn’t get enough credit for doing things right.
Chiding the agency feels like a mistake, he said, as inflation seemed stubborn for a long time. The “soft economy” is new, he added, saying last year at this time Wall Street criticized the Fed for being unable to tame inflation.
“I have better things to do with my time than lambaste a Fed chief for conceivably letting the economy wither for seven more weeks,” Cramer said. “Of course, Powell wants to give it more time — he lived through the ’70s, so did I, when the Fed would cut rates every time the economy started slowing, and then inflation would roar back again.”
