Cramer’s game plan: Strong earnings will drive the market higher

FAN Editor

As the bull market surged higher despite holdups in the Republican tax overhaul, CNBC’s Jim Cramer took the temperature of the market to see if the strength could continue.

“We still don’t even know what’s finally going to happen in Washington, but as I told you last night, we’re in a ‘damn the torpedoes, full speed ahead’ moment … because of corporate earnings — witness the pin action from Costco and Adobe,” the “Mad Money” host said.

With even Congress unable to stop the averages from reaching new highs, Cramer turned to the stocks and events he’ll be watching next week:

On Monday, the country will get the latest on the GOP tax bill following Friday’s release of the final tax plan.

But Cramer will be equally focused on European inflation data set to be released Monday, which could alter the fate of long-term U.S. interest rates.

“If the bank stocks are going to keep climbing, the market leaders, we need to see longer term interest rates go up,” Cramer said. “My thesis is that they may not go higher unless the Federal Reserve dumps its bonds — fingers crossed that incoming Fed chief Jay Powell is watching — and, more important, Europe raises interest rates.”

The European Central Bank has been focused on keeping interest rates low until it sees a pickup in inflation, which makes U.S. bonds more attractive.

Foreign money flooding in is one of the main reasons why U.S. rates are so low, and why Cramer hopes to see a higher inflation number from Europe.

“You can bet that if we get a high inflation number from Europe on Monday, Bank of America, JPMorgan and Citi[group], Goldman Sachs, Morgan Stanley, they will continue to roar. And the banks are such a powerful leadership group in this market, they could end up pulling the whole tape with them,” the “Mad Money” host said.

Darden: The Olive Garden parent reports earnings Tuesday morning, and Cramer expects a strong report, even after Darden’s disappointment last quarter.

“I think the economy’s doing a little better from last time. People start to emerge from their cocoons and go out to a sit-down dinner again,” Cramer said. “When retail sales are strong, and Costco sure says that things are, restaurants will eventually do better.”

FedEx: A healthy holiday season should bring good tidings for shipping giant FedEx when it reports.

“I say that because last night Adobe, which is the ultimate arbiter of online sales, told us that e-commerce is en fuego,” Cramer said.

Micron: An earnings report from Micron, which makes DRAM chips for storage and flash memory chips for mobile devices, could hold the key to the semiconductor sector, Cramer said.

“[DRAM]’s had very strong pricing, but [flash], however, has not been doing as well,” he said. “If Micron can’t blow away the numbers or if it revises its forecast down at all because of weakness in flash, then the semiconductor stock rally will fizzle.”

Red Hat: Tuesday’s earnings report from Red Hat, which helps companies move their data to the cloud, could also speak volumes to its sector.

“If this one delivers, and … I think it will, then we’re going to have another big move and it’s going to be in Salesforce, it’s going to be in ServiceNow, Adobe again, VMWare [and] Nutanix,” Cramer said.

General Mills: Cramer had some concerns ahead of General Mills’ Wednesday earnings report.

“I’m super worried about this one because the stock has run up 7 straight points lately. I’m calling it vulnerable. Now, we got a rumor today that Campbell Soup is going to buy Snyder Lance,” he said. “If it does occur Monday, then I bet the stock of General Mills will jump … and that’s when I want you to lighten up a little bit on the company’s stock.”

Bed Bath & Beyond: The recovery in the retail stocks could get yet another leg if Bed Bath & Beyond reports a strong quarter on Wednesday. But to Cramer, that’s a big if.

“Bed Bath hasn’t exactly had the most consistent execution,” he said.

Accenture: The way to play Accenture’s Thursday earnings report is to wait, Cramer said.

“It’s run so much that now you have to wait until it delivers a so-called disappointment,” he said. “Accenture’s stock has this pattern: almost every single quarterly report from this amazing information technology expert induces selling, and it always proves to be nothing more than a recharge before the stock resumes its long march higher.”

Finish Line: Oddly enough, Finish Line’s morning earnings report could give investors a solid read-through on Nike’s business, the “Mad Money” host said.

“We caught an upgrade of Finish Line just today, and if it turns out to be right, then you might want to buy some Nike, as it reports Thursday after the close. The stock’s had a non-stop run since it hit bottom in the low $50s where the analysts fled en masse. But a good number, and Nike, even as much as it is, gets a second wind,” he said.

Cintas: High employment will be at the back of the country’s largest uniform supplier when it reports on Thursday.

“The stock’s been a horse, and if you have some horse sense, you’ll buy some,” Cramer said.

Friday marks an unofficial day off ahead of Christmas Day, and Cramer thinks you’ll need the break.

“Here’s the bottom line: earnings have been the secret sauce to this market, and I think that the strength continues as better-than-expected sales and profits just keep driving us higher,” the “Mad Money” host said. “Next week? It should be no exception.”

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