Jim Cramer explains how to trade Thursday’s tech sell-off

Investors rotated out of some of this year’s top performers, including Nvidia and Meta. The move was propelled by a low consumer price index reading, fueling Wall Street’s hopes that the Federal Reserve will cut interest rates. Housing and industrial stocks such as Home Depot and Caterpillar saw a boost as they stand to benefit from lower rates.

Cramer said these rotations “by nature, tend to last for about three days.” According to him, bond yields must continue to drop for these stocks to keep rallying, and he said he doesn’t think “there’s enough data on the horizon to keep fueling the bond market’s rally.” He also pointed out that nothing fundamental has really changed at many of Thursday’s winning companies.

He said Big Tech buyers will be back soon enough, but he cautioned investors against buying the megacaps right now, as they need time to rebound.

“It takes time to recover from this kind of beatdown, and in the meantime, their stocks are likely to drift lower,” he said. “So, if you want to buy, I say wait a few more days. Let’s see how they react if the banks report good numbers tomorrow.”

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Disclaimer The CNBC Investing Club Charitable Trust holds shares of Nvidia and Meta.