Hedge funds choosing ‘fresh’ stocks over obvious winners drove Thursday’s rally, Jim Cramer says

CNBC’s Jim Cramer said that Thursday’s rally was driven by hedge fund managers’ desire for fresh stocks over trusted winners and that investors should not overthink the currently seesawing market.

“Traders wanted something new — not Archer-Daniels-Midland or Exxon, but AMD and Estee Lauder,” the “Mad Money” host said. “The hedge funds are in charge here, which is how you get today’s rotating bullishness. Please, never try to overthink what happens in some of these rallies,” he added.

The Dow Jones Industrial Average gained 1% on Thursday, while the S&P 500 rose 1.4%. The Nasdaq Composite increased 1.9%. The markets have teetered up and down for the past few days after last week’s monster rallies, with the S&P 500 and the Nasdaq on track to close the week higher.

Cramer said that Thursday’s rally exemplifies hedge fund traders’ penchant for buying “stuff that feels fresh and new” after growing tired of obvious winners.

“That’s the real mindset right now,” he said. “That’s how it works, it’s the way hedge funds actually think, and hedge funds seem to be the only players in the game right now. … I’m not seeing a lot of institutional interest in stocks right now.”

Examples of such fresh stocks are Nvidia and Intel, which led the day’s semiconductor stock bounce, said Cramer. Nvidia stock rose 9.8%, its best day since November, while Intel had its biggest single-day gain in more than a year with a 6.94% increase.

Other stocks that traders looked for include “how much lower can they go stocks,” Cramer said, pointing to DocuSign as an example. The company’s stock price increased 4.37% on Thursday to $104.55, but is still well below its 52-week high of $314.76.

Cramer added that investors should not let fears about the Russia-Ukraine war control their investing decisions, particularly regarding purchasing stocks. 

“Shouldn’t we be more worried about Ukraine? Yes. Does it make sense to buy anything here with Ukraine hanging over our heads? Well, maybe,” he said.

Disclosure: Cramer’s Charitable Trust owns shares of AMD and Nvidia.