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NEW YORK (TheStreet) -- It was the strength in the commodities that was able to propel the markets higher today, Jim Cramer told his Mad Money viewers Thursday. Today's spike in oil prices was even strong enough to embolden money managers to do some buying, Cramer continued, and that led to a much-needed relief rally.
Cramer credited both the Federal Reserve and China for today's 369-point rise in the Dow Jones Industrial Average, saying that comments from the Fed about being pragmatic on interest rates, coupled with a sense that the Chinese may be getting serious about jump-starting their economy, all helped send stocks higher.
But the real winner on the day was the 10% spike in crude oil prices, something that acted as a major stress reliever for those fixed-income traders dealing in nearly $200 billion of oil company bonds.
Not all was rosy in the markets, however. Cramer said there's a growing sense among money managers that a major hedge fund might be about to blow up in the same vein as Long Term Capital in 1998. There was also some profit-taking in the airline stocks, along with unexpected weak earnings from Williams-Sonoma (WSM), which fell 7.7%, along with Tiffany (TIF) and Dollar General (DG).
Most encouraging, however, was that buyers returned once again at the end of the day, Cramer concluded, afraid that they might miss more positive news overnight.
China and the Biotechs
What does turmoil in the Chinese economy have to do with the earnings of biotechs and big pharma? On the surface, nothing. People will still need medications no matter what the economy is doing. But dig a little deeper into the mechanics of the stock market, Cramer said, and things aren't quite that simple.
If the Chinese economy is downshifting, that could lead to a worldwide recession, which would cause a flight to safety, Cramer explained. Investors would sell stocks and buy more bonds.
So while the profits of the biotechs wouldn't change, their stock prices would, as investors sell their risky stocks in favor of bonds or at least stocks with dividend protection. However, even big pharma names with dividends aren't immune. Many investors buy these stocks on margin hoping for quick gains. As the margin calls mount, shares head lower.
Big pharma also has other problems, Cramer continued, currency risk. As money flows out of weak economies into strong ones, like ours, the dollar will strengthen, making foreign profits decline.
Ultimately, that makes neither biotechs nor big pharma safe investments during a recession. There is a silver lining however, and that's when stock prices fall, acquisitions happen -- as they did recently for Receptos (RCPT) and Pharmacyclics (PCYC).