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When it comes to the overall direction of the market, some stocks matter more than others, Jim Cramer told his Mad Money viewers Wednesday as he laid out the stocks that truly tell you which way the economy is heading.
Cramer started with the rails, which he said are an excellent barometer of economic strength. While the rails told tales of woe again this quarter, signs of a bottom are beginning to form.
Next on Cramer's list is International Paper (IP - Get Report) , which makes container board. He said container board pricing works on simple supply and demand, so if pricing is going up, more things are being boxed and shipped across our country.
Third, is Waste Management (WM - Get Report) , which is an terrific gauge of construction activity. The more you build, the more waste needs to be processed. Shares of Waste Management are up 16% this year, near all-time highs.
Cramer uses include HD Supply (HDS - Get Report) as another gauge of construction activity because this company supplies hardware, materials, tools and more. Finally, there's W.W. Grainger (GWW - Get Report) , a distributor of just about everything our economy needs when it's heating up. Shares of Grainger are up 14% this year.
Look to these stocks to learn how the economy is really faring, Cramer concluded.
What's Happening With Oil
Does the rally in oil and natural gas make sense? Cramer said it sure does, if you factor in what's happening to supply and demand.
For oil, Cramer said a slowdown in Canadian production along with the continued decline in output from Nigeria and Libya are putting the squeeze on crude. At the same time, gasoline demand is picking up here in the U.S.
When it comes to natural gas, that commodity's rally is based largely on warmer weather finally hitting most of the country.
Then there's the continued decline in coal demand, which is falling faster than anyone imagined thanks to the big declines in oil and gas.
All of this commodity action is great for the troubled oil drillers, Cramer said. It gives them much-needed cash to say alive. It's also great news for oil service companies such as Action Alerts PLUS holding Schlumberger (SLB - Get Report) and equipment stocks including Caterpillar (CAT - Get Report) .
Foot Locker's Problems
What the heck has gone wrong with Foot Locker (FL - Get Report) , the global footwear powerhouse with 3,500 stores worldwide? Cramer said Foot Locker used to be best of breed thanks to exclusive merchandise and hard to beat deals, but so far this year shares are down 15%.
Foot Locker's problems started when the company reported in February. After seeing shares rise 16% in 2015, Foot Locker was able to report strong earnings, but it also noted that same-store sales had declined substantially towards the end of the quarter. That news sent shares down a quick 4%.
But when Foot Locker reported on May 20, the true extent of the decline became apparent, with same-store sales growth slowing to just 2.9% The company said basketball footwear accounted for much of the loss.
Is it time to give up on Foot Locker? Cramer said not so fast -- only some, not all, of the company's basketball apparel was to blame. After seeing a bottom forming in Under Armour (UA - Get Report) , Cramer said the worst may indeed be behind us. The rest of Foot Locker seems to be doing pretty well, with international sales still picking up steam with the weaker U.S. dollar.
What's New at HP?
After speaking with Hewlett Packard Enterprise (HPE - Get Report) CEO Meg Whitman on last night's show, Cramer wondered about the other half of the old Hewlett-Packard, HP Inc. (HPQ - Get Report) , which contains the former company's legacy hardware businesses.
When HP last reported, it delivered a 3-cents-a-share earnings beat and saw a 5% increase in earnings per share. This news was better than expected and sent shares sharply higher after the report.
But Cramer noted that on the company's conference call, there were some skeptics who challenged how HP's printer supply business could stabilize as the company indicated it would, given that it is selling fewer printers every quarter. HP reported supplies were down 16% year over year.
With no good answer to this question, Cramer said he's ready to declare that HP is not in as good a shape as the company claims. He said both printers and PCs are in secular decline and that means so is HP. Sure, it trades at 8.4 times earnings and has a 3.6% yield, but that's not enough to warrant an investment.
Off the Tape
In his "Off The Tape" segment, Cramer sat down with Alejandro Velez and Nikhil Arora, co-founders of the privately held Back to the Roots, the organic food maker with foods you can grow and make yourself.
Back to the Roots began in a dorm room after the founders learned that you can grow your own mushrooms with used coffee grounds. Their mushroom kit, which grows the fungus in just 10 days, was picked up by Whole Foods Market (WFM) , launching the company.
Arora said people have become very disconnected from their food and the pendulum is swinging back to natural and organic, especially with Millennials. The company's "Garden in a Jar" and other products can be grown indoors by anyone and is especially catching on with children.
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