We saw a lot of cross-currents in the markets, Jim Cramer told his Mad Money viewers Monday, but investors need to be careful about drawing conclusions about how the markets behave on a Federal holiday. We'll know a lot more tomorrow when the bond markets open again for trading.
Cramer explained there are a few different schools of thought emerging in the markets. In the first camp, investors fear the Federal Reserve will overshoot on interest rates, tamping down inflation by any means necessary, rather than taking a measured, data-driven approach.
In such a scenario, investors should be buying consumer staples, along with REITs and utilities. That's why the stock of PepsiCo (PEP) - Get Report was able to rally 1.6% despite a lackluster performance after it reported earnings last week. Even Kimberly-Clark (KMB) - Get Report , which received a downgrade Monday, was able to eke out a gain on the day.
In the second camp, investors fear the opposite: runaway inflation. They point to Amazon (AMZN) - Get Report raising its minimum wage and PPG (PPG) - Get Report today announcing a 10% price hike in its automotive coatings to combat rising costs in commodities, transportation and labor. Inflation means that the future value of fast growers like Service Now (NOW) - Get Report and Adobe Systems (ADBE) - Get Report will be less, which is why those stocks fell.
There is even a third camp emerging, Cramer noted, one that believes that interest rates have peaked and our oversold market should be bought. These were the people buying toward the end of the day.
Which camp is right? Cramer said it's hard to say today, on a day when the bond markets were closed. But we'll have a much clearer picture Tuesday.
Cramer and the AAP team are trimming some Cimarex (XEC) - Get Report . Find out what they're telling their investment club members and get in on the conversation with a free trial subscription to Action Alerts PLUS.
Signs of Inflation
After digging into the details of last week's employment report, Cramer determined there's not that much to be scared of and inflation is not running as rampant as it appears to some.
Among the sectors with the biggest increase in jobs were white collar workers -- those that have been displaced and struggling against digital automation for years. The companies doing this hiring were big winners from tax reforms, so their numbers may be inflated over the short term.
The second biggest sector with job gains was healthcare, a group that's long fought to keep costs under control. It's not likely that this group will cause a problem over the long term, either.
Then there's transportation, where no one seems to be talking about new regulations that limit the number of hours truck drivers can drive. It's no wonder this group needs more bodies, as each of those bodies must now produce less.
But all of these gains are being offset by slowing in housing and autos, as we saw with layoffs announced by Ford (F) - Get Report just today. Even Amazon's minimum wage increase came with a reduction in overtime and bonuses, and was not as generous as it might seem.
Cramer said what's most damaging to the markets are not these job gains, but the rhetoric coming out of the Fed. The rhetoric needs to cool, and soon, he said, or investors will be right to worry.
Over on Real Money, Cramer says the belief that retail will be crushed by higher wages and tariffs is leading us down. Get more of his insights with a free trial subscription to Real Money.
Cramer's Power Rankings
Investors can learn a lot from the sports world, Cramer told viewers. In sports, it's not only the standings that matter, it's the up-to-date rankings of who's playing their best at any given moment. That's why he unveiled "Cramer's Power Rankings" -- his top five stocks in a sector. Monday night's sector: Communications, which now includes telecom, media and even video game companies.
Cramer's top pick was Walt Disney (DIS) - Get Report , a stock which is only up 8% for the year, but now has all of its distractions behind it so it can focus on the future. Shares trade at just 15.5 times earnings.
Second, Cramer picked Alphabet (GOOGL) - Get Report , a stock that's also cheap at 24 times earnings, but one that doesn't deserve to be trading with social media. The core business at Google remains strong and there are many ways to win.
Third was Take-Two Interactive (TTWO) - Get Report , the video game maker that's always been a hit-driven stock. We're just weeks away from its next big release, "Red Dead Redemption 2." Cramer called the stock "a steal."
Zillow and Interest Rates
It's maddening when a great company makes an unforced error, especially when management could have done absolutely nothing and still come out ahead. That's been the case with Zillow (ZG) - Get Report , the online real estate kingpin that's rapidly fallen from grace.
Zillow has been an Internet darling for ages, a super-fast grower that owned its space. But shares have now fallen from their highs near $65 to just $40 today and there doesn't appear to be a bottom in sight.
The problem was Zillow's decision in April to begin buying and selling their own homes. The theory at the time, who knows the real estate market better than Zillow? It turns out, everyone except Zillow knows you don't start buying homes when interest rates are on the rise.
Cramer said this pivot was a terrible idea and had terrible timing. Investors didn't sign up to own an interest-rate-sensitive company, they thought they were buying a fast-growing tech stocks. The company has huge opportunities ahead of them, but instead chose to mire themselves down in a slowing housing market.
Off the Tape
In his "Off The Tape" segment, Cramer sat down with Kim Rivers, CEO of Trulieve, the Canadian-based medical marijuana provider serving 80,000 patients in Florida with over 90 products.
Rivers explained there that 10 medical conditions in Florida where doctors can prescribe cannabis-based treatments and they range from post-traumatic stress disorders to AIDS, cancer, seizures and more. Many of these are conditions where opioids are often prescribed and abused, she said, making Trulieve a great alternative.
Rivers said that studies have shown in states where medical marijuana is legal, opioid abuse has been reduced dramatically.
While the company is not able to expand to other states with its current license, they would like to expand when laws allow.
In the Lightning Round, Cramer was bullish on Vail Resorts (MTN) - Get Report , Mastercard (MA) - Get Report , CyberArk Software (CYBR) - Get Report , TherapeuticsMD (TXMD) - Get Report , Dell Technologies (DVMT) and Edwards Lifesciences (EW) - Get Report .
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At the time of publication, Cramer's Action Alerts PLUS had a position in XEC, AMZN, DIS, GOOGL.