As bond yields rise, Jim Cramer shrugs off inflation fears roiling stocks

The debt market continued to weigh on the stock market Thursday, triggering another brutal sell-off that hurt growth names especially, CNBC’s Jim Cramer said.

“The bond market sees the economy getting ready to reopen … and it figures the last thing we need is more stimulus” the “Mad Money” host explained. “To these bond investors … that’s like throwing gasoline on the Kingsfords. They think the economy will overheat … [and that] we’re going to get some serious inflation.”

The yield on the 10-year U.S. Treasury note, a key interest rate barometer, breached 1.6% for the first time in a year on Thursday. Meanwhile, the tech-heavy 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 few opportunities to find gains that day in the market. The blue-chip index shed nearly 560 points to close at 31,402.01, a 1.75% decline. The benchmark fell 2.45% to 3,829.34.

Worries of inflation picking up spooked investors out of high-growth names for another day this week. Earlier this week, Federal Reserve Chair Jerome Powell recommitted to leaving the federal funds rate at near-zero levels to help the economy crawl out of the pandemic-induced downturn. Elsewhere in Washington, the Biden administration is looking to woo lawmakers to pass a $1.9 trillion coronavirus relief package, which has also sparked fears of a rising consumer price index.

Inflation weighs on currency and consumer purchasing power.

“As I see it, Powell and Biden are doing the right thing. I don’t mind a little inflation now and then,” but “investors are selling bonds, pushing long-term interest rates higher,” Cramer said. “When that happens, stock buyers pull back. They always do.”

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

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

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

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