• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Jim Cramer

Jim Cramer: The Market Sneezes

News that the Chinese coronavirus reached us and the Boeing flop have finally pushed us down, but what if it's short-lived?
By JIM CRAMER Jan 21, 2020 | 06:08 PM EST
Stocks quotes in this article: BA, CCL, LVS, WYNN, EL, MAR, COST, BYND, SBUX, TSLA, UBER, MSFT, EVRG

For a moment there, I thought this market would never quit.

You have a virus out there in Asia that's killing people. You have an impeachment trial where you figure that the Democrats must have something up their sleeves, some card they haven't played. And you have execs falling all over themselves in Davos to take action on the environment that will hurt their earnings per share, even as it helps impact per share.

No matter, the market lapped it up. Until, that is, we learned that that virus had reached our shores and Boeing (BA) announced that it expects the MAX aircraft won't come into service until June or July, dashing hopes for an April or May return to service. Boeing's stock had been a model of stoic strength. But now it crumbled.

The coronavirus is precisely the kind of illness that would have decked any other market and it should have crushed our market at the opening. But it took the scourge reaching us and Boeing to flop again to get the downhill push going.

While the virus so far has not resulted in a huge number of fatalities, the fact is that the respiratory virus has not been able to be contained so far -- witness the news from the Centers for Disease Control and Prevention that we have a confirmed case on our own shores, something that saw the average tumble when the news broke. So far, it's produced many fewer deaths as a ratio of those contracting the illness than did SARS, the scourge that hit Asia until 2003. With SARS, some 8,089 got sick and 774 died. But the two diseases are both respiratory illnesses that could spread human to human and therefore very worrisome to a host of industries that could be hurt worldwide.

Is this kind of Asian-related sell-off rational? Yes, initially, for a host of travel related stocks. That's because we know that earnings could get nicked, especially given that we are at the beginning of the Spring Festival -- the Lunar New Year-time -- travel boom, an occasion that sees hundreds of millions of people going on vacation.

"The outbreak is at a critical stage, and we estimate an increasing number of infections during the 40 days of Spring Festival travel rush," said Zhong Nanshan, a Chinese health expert health who discovered SARS, told the Washington Post. The fact that it has infected at least 15 health professionals out of a total of 219 speaks to the illness' virality, even if its respiratory effects don't appear as dangerous as the sickness that struck 17 years ago.

It is totally logical to expect any company that was banking on a surge in traffic to be concerned, and you can expect analysts who cover the cruise lines will cut numbers. Carnival's (CCL) stock fell 28% when SARS struck. It's only down 2% as of Tuesday. The casino companies in Macau could see a traffic dip making them vulnerable for more than just the 5% to 6% decline that Las Vegas Sands (LVS) and Wynn (WYNN) felt. Estee Lauder (EL) , which sells cosmetics in duty free shops in Hong Kong, could see a falloff, too, beyond the 1% and change decline it suffered.

Marriott (MAR) , which bought Starwood, which had a major presence in China, should also see its stock go down as was the case Tuesday, although I suspect you won't even see this one in the numbers. Its stock did fall 12% during the SARS epidemic. The airlines are natural sells, too, especially since someone in this country has contracted the illness. The big international companies saw their stocks go down about 4%.

I mention all of these, however, because that very well could be the extent of the impact and if the entire market goes down in the illness that could be your chance to get into some stocks that might otherwise not be down and have nothing whatsoever to do with Asia. It's the ultimate exogenous event that impacts few, but spreads to many. I suspect it will run its course until drug companies get their arms around the crisis and people simply don't go out as much as they did.

I am betting that it is a short-term issue, as SARS lasted about five months before it petered out. While it is early, I expect the damage to be cordoned like it was with SARS.

The illness now isn't a sideshow. It's front and center and it is dragging everything down, except a few select stocks like Costco (COST) , which got an upgrade Tuesday, timely given the interview set for Tuesday night with CEO Craig Jelinek. Or Beyond Meat (BYND) , which keeps moving up on any news about more adoption of plant-based dishes, like the one we got Tuesday from Starbucks (SBUX) . Or Tesla (TSLA) , which is going up, despite still one more sell-side warning that the stock has run too much. Or Uber (UBER) , which is taking action to curtail losses from Uber Eats, including the shedding of Uber Eats in India. I think that stock has much more room to run.

So what should the market be focused on if this illness could be short-lived? How about one simple word: Davos. That's where the World Economic Forum is being held and we are getting an astonishing outpouring of anti-carbon statements and plans from so many of the large companies. They tend not to be as powerful as what we heard from Satya Nadella when we visited Microsoft (MSFT) last week. He laid out serious plans, not just to be carbon-neutral but carbon-negative -- potentially rolling back all of the carbon it has spewed since it was started in 1975. But they are noteworthy in their cost to the company short-term, and the belief that if they don't take such actions there would be no long-term. I know there is a tendency to say that these companies have to do it because our government has abdicated its duty to push for cleaner air, cleaner water and less carbon emissions. But I think they would have done it anyway.

I don't think anyone is yet trying to game the system by talking about the environment and then doing nothing about it, so-called "green washing." However, given the amount of money coming into sustainability funds, it wouldn't surprise me if the companies that visibly care and can back it up with facts, figures and audits, will ultimately get higher price-to-earnings multiples than those who don't.

Sometimes it is just good business. Elliott partners, one the most rigorous money managers out there has bought a big stake in a utility, Evergy (EVRG) , and is adamant that the company should replace its coal plants aggressively. "De-carbonization," Elliott said in its letter to management, is a must and could be a godsend for a company still heavily powered by coal. Because of the strength of the wind resource in Evegy's service territory, Evergy stands to be a leader in de-carbonization system investments that facilitate renewable's growth and help transition its coal fleet, which still accounts for 40% of its generation. Still the plea from Elliott has nothing to do with the ESG movement. It's what's good for business, the business of power generation.

Ultimately, I think the coronavirus is an exogenous event that allows you to get in to stocks that have nothing to do with travel or casino gambling. It is, however, a good excuse for someone who wants to sell especially because China is not exactly being all that very forthcoming about what's happening. Then again, should we expect anything else?

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.
TAGS: China | Jim Cramer

More from Jim Cramer

Jim Cramer: I'll Put My Money With 'Boring but Lucrative' Any Day

Jim Cramer
Sep 29, 2021 1:28 PM EDT

Let's look at that recent downgrade of 'dull' Morgan Stanley and see why exciting is best left for the stadiums and amusement parks -- and not stocks.

Jim Cramer: America's Toughest Job? Finding Workers

Jim Cramer
Sep 28, 2021 12:17 PM EDT

It's the question of our time: Where are the people willing to take on these better paying gigs? Let's see what's going on and what we need to happen.

Jim Cramer: Here's How Analysts Can Be Off By a Wide Margin

Jim Cramer
Sep 24, 2021 12:02 PM EDT

Let's look at the reactions to Nike, Costco and Salesforce to see what happens when they're viewed from a real world perspective.

Jim Cramer: It's Pure Insanity That We Don't Make Chips Here in the U.S.

Jim Cramer
Sep 23, 2021 11:05 AM EDT

While the big guns meet at the White House about the global chip shortage, the president and these companies are approaching this all wrong.

Jim Cramer: Go Ahead, Have a Cow, but I Say Powell and Xi Are Bulls

Jim Cramer
Sep 22, 2021 3:51 PM EDT

We rallied, because China's President Xi and Fed Chair Powell made decisions that they knew would lead to rallies.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 01:51 PM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Adjusting Your Trading Approach to Shifting Market...
  • 06:54 PM EDT CHRIS VERSACE

    AAP Podcast: A Tongue -- and a Market -- Twister: 'Get a Debt Deal Done'

    Listen in as the Action Alerts PLUS Podcast tackle...
  • 12:07 PM EDT STEPHEN GUILFOYLE

    Selling Some of This Surging AI-Related Stock

    This isn't the only name in the Stocks Under $10 p...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login