Shares of Lowe's increased more than 10% after the company had better expected results in the second quarter lifting guidnace Wednesday.
Asking CNBC's Jim Cramer isn't the only thing supporting the stock rally during the session.
After Home Depot – Lowe's main rival – beat forecast estimates the day before, a number of hedge fund managers loaded up on equity and decided to short Lowe, he said. The short thing is when an investor bets that a stock price will fall in the near future and try to make a profit on the depreciation.
"This type of trade is a way of betting on the comparative performance of companies in a given industry," the host said, "Mad Money" and called it a "pair trading."
When Lowe's reported this morning, but they realized his hands were wrong. The home improvement retailer had somewhat higher sales growth in the same store in the US than Home Depot ̵
"Traders know that discipline trumps conviction, that's a rule. If a trade goes against you, you have to get out, which in this case means covering your short positions at all costs," he said. "Disciplined short sellers bought back shares to close their positions and take the loss, and it catapulted things into the stratosphere."
Cramer gives more insight into short clips here
Traders working on the floor of the New York Stock Exchange (NYSE) on August 14, 2019 in New York City.
Spencer Platt | Getty Images
Cramer said the economy is in good shape, but Wall Street could talk itself into a recession.
The stock market, which climbed below 1% during the trading day, continued to stage the recovery from last week's massive sales triggered largely by concerns of a recession signal, at the height of the protracted US-China trade war.
and both posted their fourth positive trading days in the last five, while completed their third in four days.
"If the president were to just calm down rhetoric against China, rather than take it on as a kind of garbage-talking wide receiver, the bears would lose their biggest crutch," said the host, who blamed the bond market fears of "angry rhetoric and scary jeremiads from supposed experts "who should listen to conference calls.
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The pulse of medium-sized businesses
Chad Richison, CEO, Paycom
Scott Mlyn | CNBC
The head of a payroll services company told CNBC that he sees no signs of slowdown in mid-sized businesses, despite growing fears of a looming economic downturn.
Paycom CEO Chad Richison said his company may not be a big "proxy" for the rest of the economy, but his company has a pulse of hiring in the country. The cloud-based human capital management provider has digitized how employers run their HR stores.
The technology company is a disruptor in the payroll industry with more than 23,500 customers and targets companies that employ 50 to 5000 people.
"I think the economy has been strong," Richison said one-on-one with Cramer. "We don't really see a deterioration in growth in [medium-sized businesses] but you know, we're waiting to see what happens."
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Cramer's Cloud Cover
Dean Stoecker, CEO, Alteryx
Scott Mlyn | CNBC
Technology has affected almost every industry and one subgroup is transforming the back end of business operations.
Cloud computing is a secular growth issue in recent years that has been one of the hottest parts of the market, yet the average person can't explain what the companies that make up the group actually do, CNBC's Jim Cramer said Wednesday.
The host "Mad Money" has crowned a number of his favorite stocks in the sector under the so-called and risky "sky prince" umbrellas, but recommends that investors only own companies for which they have done their homework.
"There are a lot of good opportunities in the cloud space, but if you are going to own these shares, you have to understand what these companies are actually doing, and that's why we run the entire cloud primer series," he said. .
Cramer broke down and made recommendations for 11 names in the cloud-based software cohort.
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Disclosure: Cramer's charity trust
owns shares in Home Depot.
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