NEW YORK (Real Money) -- So we've decided all at once that we are tired with the expensive health care stocks. We want cheap, down and dirty, and that's why the averages are doing what they are doing.
The question is, do we have a contrary day on our hands, or is this the new setup? Are we gripped with some sort of sea change, or is this just the same sucker rally we have seen time after time after certain stocks get pushed down to the point where they can spring back regardless of the fundamentals at the companies?
Let's figure it all out.
First, the overriding reason why you get a sea change in all stocks has much less to do with earnings and much more to do with world view. Until today, we were looking at stocks on a case-by-case basis, trying to make decisions based on how a quarter played out. If a company raised earnings and sales guidance, it went higher. If it cut, the stock went lower. Pretty simple stuff. Just the way it should be in a world where individual companies control their own destinies.
But then there are days like today where we throw the book out on what companies are saying and we make decisions based on some big-picture theme that almost totally overrides what the companies themselves are saying.
How do you spot these? You look at the best of the best of the companies that reported good numbers and you look at the worst of the worst of the ones that reported the worst numbers and you extrapolate to make judgments and spot trends.
So let's take the best of best, starting with health care. This group has been on fire for most of the year and it's been a dramatic run. I am going to use UnitedHealth (UNH) - Get UnitedHealth Group Incorporated Report as the example, the paradigm, to explain what's happening.
UnitedHealth reported an incredible quarter, guided higher on the top and bottom line, and showed you how it has incredible earnings power in an environment where the Affordable Care Act is the law of the land. It had excellent enrollment growth, low health care costs. It's a purely domestic play that has nothing to do with the dollar; no headwinds with this one. This Dow Jones Averages company delivered everything you could ask for. I would go as far to say it was picture perfect.
And it is getting hammered. It seems no one wants it.
Now let's take Freeport-McMoRan (FCX) - Get Freeport-McMoRan, Inc. (FCX) Report. This company had what can only be called a disastrous quarter. It lost $2.5 billion, or $2.38 a share. It has a heart-stopping $20 billion in debt.
Its copper business has been in the doldrums forever, in part because China's slowing down a lot more than people seem to realize. It even went as far as to call out its copper business as disappointing. Who says "we disappointed" these days? Gold's been going nowhere.
This company bought an oil and gas business right at the top and borrowed heavily to do so. On the call, we learned it intends to sell a big chunk of the company to pay for the acquisition. Worst of all, it slashed its dividend by 84%, a dividend that attracted many income seekers to the stock.
And what's Freeport done since that miserable and most unfortunate series of events? How about nothing but roar higher, including today.
Is this insanity? Is this one of those cruel jokes that the market's playing on us?
Hardly, this frontsy-backsy action is the sign that some are betting on a sea change. First, it's a bet that commodity inflation is going to get stronger and interest rates are done going down. Freeport is a pure commodity play, kind of like a commodities supermarket. It can only rally if people think inflation is coming back. That's what makes you want to buy gold. It's what you think about when copper's coming back. It's about oil making a U-turn and going higher.
What do all of these have in common? What spurs them? A weak dollar, that's what. Commodities are priced in dollars. When the dollar goes down, it takes more of them to buy commodities. Freeport, the ultimate mosaic of commodities, is reacting to what could be a weak dollar, not what could be better earnings. The company just told you how bad things are.
Then how about UnitedHealth? Investors have been hiding in UnitedHealth for ages and ages because they didn't need to worry about a strong dollar. It is all domestic. UnitedHealth's value rests in its long-term earnings growth, but if inflation comes back, we won't pay as much for that growth. It's basically a stock that you have to avoid if there is commodity inflation and the dollar peaks because portfolio managers will rotate out of it no matter what the company does!
Are these two aberrations?
I don't think so. Let's get another contrast: Helmerich & Payne (HP) - Get Helmerich & Payne, Inc. (HP) Report vs. Celgene (CELG) - Get Celgene Corporation Report. If you don't know Helmerich & Payne, you are missing out on one terrific company. It's a storied oil driller, maybe the best on the planet, and it was also the first company to warn that if oil kept going down -- and this was when oil was in the $70s -- its earnings would be crushed. Yet it raised its dividend anyway and spoke of a much longer-term future ahead of it. Today, Goldman Sachs upgraded it to a buy from a hold and it is screaming. HP's incredibly sensitive to the price of oil, by its own admission. You get this kind of move when you know that oil's bottomed. Don't believe me? Check out Seadrill (SDRL) - Get Seadrill Ltd. Report, a drillship company, which is rallying even as two firms cut it to a sell! Again, that's the sea change at work.
At the same time, Celgene, which had not one but two separate bits of good news -- a terrific acquisition and excellent results on a drug trial -- is just getting annihilated.
I could go on and on about different stocks and what's happening with them. But it's all the same exact pattern. Dollar topping, oil going higher, gold rallying.
Now, before you go out and sell every safe stock that has been a terrific performer and chase all these companies that have had subpar results, let me point out that we have seen many a rotation into the down-and-dirties and out of the sweet-and-lights over time, and they have pretty much all been sucker plays. This time, however, it feels like it has a little more credence. The dollar just seems to refuse to go higher. The euro's doing well because the world wants to own European stocks. The data out of the U.S. hasn't been strong of late, with the strong dollar taking its toll. In other words, the move could make sense. It could reverse on a dime, or more likely on a dollar.
But you have to recognize that many see the sea change as real, and they will react the way some react to extreme patriotism -- my country right or wrong -- so if you are worried about short-term movements, be aware that this vicious squall may not be done and the damage in its wake could override terrific earnings for days and days before the tempest has past.
Editor's Note: This article was originally published at 1:46 p.m. EDT on Real Money on April 27, 2015.
At the time of publication, Jim Cramer's charitable trust Action Alerts PLUS held no positions in stocks mentioned.