The major averages may paint an ideal picture for the stock market, but CNBC’s Jim Cramer warned on Tuesday that some strong sectors aren’t enough to sustain a long-term rally.
“The truth is that while a couple of groups are leading the way here, namely tech and retail, very few stocks away from those groups are following,” the “Mad Money” host said. “If we don’t get some more followers soon, this could spell the end of this advance.”
Cramer couldn’t discount the strength in tech, with Netflix’s stock jumping nearly 2 percent, or in retail, with Gap and Macy’s stocks soaring 6.8 and 8 percent, respectively.
But he knew that two strong sectors simply couldn’t take the rest of the market to new highs.
“The bulls have retail, which means the consumer is smoking, and the bulls have tech, the largest sector in the S&P 500,” he admitted.
“Sadly, that’s where it ends,” Cramer said. “There are so many other groups lagging behind and they represent a major obstacle to this market charging to new highs.”
Sometimes, Cramer finds the symbolism on Wall Street to be “downright heavy-handed.”
On Tuesday, that came to the fore when Dow Jones Indices announced that the stock of Twitter would replace agrochemical play Monsanto in the S&P 500 index.
“We’re right on the precipice of the first generational change in the S&P 500 in ages and I can’t help but feel that this is a metaphor for the way these companies are headed,” Cramer reflected.
He highlighted the market’s widespread “skepticism” towards Monsanto, a $56 billion company that pioneered the development of generically modified seeds and GMOs.
“It’s out with the once-thought-of-as-new GMO makers and in with social media,” Cramer said. “Social media [is] as loved as GMOs are hated by those who seem destined to take over the earth.”
Driving Palo Alto Networks into the future was one of outgoing Chairman and CEO Mark McLaughlin’s primary concerns when he was choosing his successor, he told CNBC on Tuesday.
The cybersecurity company announced on Friday that former SoftBank and Google executive Nikesh Arora would take over as CEO effective Wednesday, June 6.
Palo Alto’s stock declined on the news, recovering slightly after the company reported third-quarter earnings that topped expectations. Still, investors remained hesitant, with the stock shedding another 2 percent in Tuesday’s trading session.
But despite initial backlash to what some perceived as Arora’s lack of cybersecurity expertise, McLaughlin and Arora told Cramer in a joint interview on Tuesday that Palo Alto was in good hands.
Now a pure play on timeshares, the newly renamed Wyndham Destinations (formerly Wyndham Worldwide) will focus on sustaining its year-over-year growth while adapting to consumer needs, CEO Michael Brown told Cramer in a Tuesday interview.
“The industry is as strong as ever, [with] growth every single year,” Brown said. “But what’s interesting [is] the growth is really changing in favor of branded hospitality players. Over the last few years, the market share of those branded hospitality players has nearly doubled.”
And Brown argued that Wyndham Destinations, which operates in 110 countries, is uniquely positioned to serve not just vacation-seekers, but a majority of consumers.
“What we’re seeing from consumers today is they love space, they love amenities and they love the confidence and consistency that’s always delivered by branded hospitality players,” the CEO said.
“Wyndham Destinations serves the everyday traveler,” he continued. “That’s the largest demographic of traveler in the United States today and that’s the segment that we sit in. We’re the largest vacation ownership company in the industry and we proudly serve the customer that not only values vacation, but they value great value in their vacation.”
To watch Brown’s full interview, click here.
Technology is what medical device maker Medtronic is based on, and the company’s latest products were on full display in Cramer’s Tuesday interview with Chairman and CEO Omar Ishrak.
One of the company’s most cutting-edge devices is a new pacemaker called the Micra Pacemaker, a tiny device that can be inserted through a catheter and provides instant recovery for patients in need.
“The most interesting part of the story which I’m really proud of … is that the company was actually founded with this,” Ishrak told Cramer, showing him Medtronic’s original pacemaker from 1950.
“The founding of the company was based on this device,” the CEO said. “And here we are 60 years later: the same company disrupts this industry over and over again until we go from there to there.”
Ishrak also brought Medtronic’s latest diabetes management system, which automatically adjusts patients’ insulin levels and serves as an alternative to an artificial pancreas. To watch the full interview, click here.
In Cramer’s lightning round, he rattled off his take on callers’ favorite stocks:
Dropbox, Inc.: “Buy Dropbox. Dropbox reminds me of Spotify, when we said in the $150s you have to buy it. This is a great company that’s doing a lot of great things.”
Banco Santander: “Banco Santander is not so good right now. I don’t like the turmoil in Spain. I don’t like the changing government. I’m going to have to say you’ve got to take a pass. I mean, there was a great long-term run there, but Spain is problematic.”
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