As tech stocks slump, consumer companies are gaining strength, says Jim Cramer

CNBC’s Jim Cramer reviewed Thursday’s market performance and told investors that despite losses at Big Tech, gains in consumer companies are pushing stock prices higher. Huge spending on artificial intelligence is attracting attention.

“Retail is such a huge part of this economy that it can mask the kinds of questionable transactions that we’ve seen in the past at the highest levels of technology,” he said.

of S&P500 On Thursday, the stock ended a four-day losing streak and closed up 0.79%. of Nasdaq Composite Add 1.38%; Dow Jones Industrial Average It increased by 0.14%. Wall Street welcomed the weaker-than-expected inflation data after the Labor Department released November’s Consumer Price Index, which had been delayed due to the prolonged government shutdown.

The consumer sector has spent much of this year under pressure, Cramer suggested, as Wall Street worries about the state of the economy and spending, especially as stubborn inflation hurts consumer confidence. He pointed out that the index’s rise was mainly driven by high-tech companies supported by the artificial intelligence boom. However, he added that the field has become largely unpopular as investors question the company’s large AI investments.

Kramer said many of Thursday’s winners came from the consumer sector, naming Olive Garden’s parent company. Darden Restaurants, texas roadhouse, williams sonoma, target and kohls. He suggested that “the consumer cavalry has arrived here just in time to give us what looks like the beginning of a Santa Claus rally,” which was a welcome move as the market needed to make up for the loss in technology.

Cramer said the Fed’s decision to cut interest rates now appears justified, adding that consumers should spend more if the Fed lowers rates. He suggested costs would fall further, giving the central bank more room to cut interest rates next year.

“Of course, we have to ask ourselves whether this movement is sustainable. But I think the trend of lower prices is just beginning,” Kramer said. “Given the oil glut, gas prices will struggle to rise. This will give consumers extra cash to spend as they wish.”

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Disclaimer CNBC Investment Club owns stock in Texas Roadhouse.