As bond yields rise, Jim Cramer dismisses inflation fears plaguing stocks

The debt market continued to weigh on the stock market on Thursday, triggering another sharp selloff that particularly affected growth names, CNBC’s Jim Cramer said.

“The bond market sees the economy preparing to reopen … and it feels the last thing we need is more stimulus,” said the host of “Mad Money.” “For these bond investors… it’s like throwing gasoline on the Kingsfords. They think the economy will overheat … [and that] we’re going to have severe inflation. “

The yield on the 10-year US Treasury note, a barometer of key interest rates, broke 1.6% for the first time in a year on Thursday. Meanwhile, the highly technological Nasdaq Composite plunged 3.52%, its worst session since late October, to close at 13,119.43.

The Dow Jones Industrial Average and S&P 500 also suffered big losses, leaving investors with little opportunity to make gains that day in the market. The blue chip index fell nearly 560 points to close at 31,402.01, a decline of 1.75%. The benchmark index fell 2.45% to 3,829.34.

Worries of rising inflation scared investors of high-growth names for another day this week. Earlier this week, Federal Reserve Chairman Jerome Powell again pledged to leave the federal funds rate near zero levels to help the economy come out of the pandemic-induced downturn. Elsewhere in Washington, the Biden administration is seeking to entice lawmakers to adopt a $ 1.9 trillion coronavirus relief package, which has also raised fears of a rise in the Consumer Price Index .

Inflation weighs on the currency and the purchasing power of consumers.

“In my opinion, Powell and Biden are doing the right thing. I don’t mind a bit of inflation every now and then,” but “investors are selling bonds, pushing long-term interest rates up. rise, “Cramer said. “When that happens, the buyers of shares pull out. They always do.”

“And they pull back hard from high growth stocks that pay a high price in times of inflation,” he explained. “That’s what happened today.”

The decline of the market has consumed all corners of the industry. All 11 S&P sector indices were in the red at the close, with the consumer discretionary and tech segments falling more than 3%. Of the 30 stocks in the Dow, only Merck, Johnson & Johnson and 3M managed to have a positive trading day.

Apple, Boeing and Salesforce were among the biggest losers of the day.

Disclosure: The Cramer charitable trust owns shares of Apple, Salesforce and Boeing.