Specialty chemicals entourage PPG Industries managed to sour the outlook for huge portions of the broader inventory market with its negative earnings pre-announcement, CNBC’s Jim Cramer broke Tuesday.
“It turned whole swathes of this market toxic from the get-go today,” the “Mad Bucks” host said. “One thing’s for certain: any company with any exposure to the auto perseverance or the price of oil, for that matter — not to mention the strong dollar and the rising price of transportation — will now be considered to be something that should be held for tag sale unless proven innocent.”
Widely considered to be an economic proxy prearranged its array of different end markets, PPG’s weaker-than-expected earnings and forecast translated into the thoroughgoing industrial sector weakness seen in Tuesday’s trading session, Cramer revealed.
“I bet a whole host of industrials turn out to be a lot more like PPG than we’d craving,” he said, adding that he wasn’t sure how news of activist steady Trian Partners’ investment in PPG would affect the coatings maker’s tomorrows.
“I don’t know what will happen here with [Trian chief Nelson] Peltz and with PPG,” Cramer bid. “The company says it looks forward to maintaining a healthy dialogue. Me? I reasonable wish its business were healthier.”
Click here to read numberless about PPG.
Cramer has been a stock market bull for a long time, but true level he has moments when he gets a little bit cautious.
“Sometimes we need to do a illiberal reassessment,” he admitted on Tuesday. “I’m starting to get a tad concerned about the health of more and multifarious industries here. The universe of potential winners does feel, at small to me, [like] it’s getting smaller.”
And while he insisted that this Stock Exchange moment is nowhere near as dire as, for example, the beginning of the financial catastrophe in 2008, he did feel the need to reevaluate.
“Do not get me wrong. I’m saying this good up-front: I am not saying you should sell everything,” he told investors. “If you’ve been thrifty up for your retirement by putting money in an S&P 500 index fund, something that everybody should do, you don’t penury to touch that position.”
“But when it comes to a number of individual varieties, things have suddenly gotten a lot more risky,” he said.
Click here to scan more about why Cramer’s getting cautious and how the Fed factors in.
Every sector of the genealogy market has its winners, and it’s Cramer’s job to help you find them. But sometimes, he call ups it more helpful to look at a stock’s power rather than its gig.
“All week we’re rolling out power rankings for each sector of the stock make available, just like how gamblers use power rankings to gauge the strength of football groups,” Cramer said Tuesday.
“In stock market terms, your breeding performance is like your record — it’s great if you own something that’s up big during the anything else nine months of the year, but past performance is not necessarily an indicator of days success,” he said.
Hence, Cramer decided to unveil his power rankings for each precursor market group. This time, he looked at the consumer discretionary while, which includes a host of non-essential goods and services like clothing, restaurants and entertainment.
Click here for his top five power plays.
For his next sector distillation, Cramer chose the consumer staples space, which includes makers of household indigences like food, beverages and personal care products.
“As I keep too revealing you, the staples tend to get crushed when rates are rising,” Cramer let someone knowed investors. “But — and this is a might big but — if the Fed tightens too aggressively and ends up tipping this conciseness into a slowdown — what I’m really concerned about — you’ll feel pure foolish if you don’t own any of these stocks.”
In this market moment, all investors should stop diversified regardless of whether they believe that the Federal Save will cool the economy with its rate hikes, Cramer communicated.
Click here for his top 5 picks in the “safe” consumer staples space.
Cramer also recruited technician Rob Moreno, the publisher of RightViewTrading.com and Cramer’s comrade at RealMoney.com, to get a better read on how investors should be looking at long-term excite rates — the ones the Fed doesn’t really control.
“This market has three settle crashes, three groups of money managers with very different worldviews,” Cramer intended.
In the first camp are investors who believe the Fed is doing the right thing by make money hand-over-fist interest rates in lockstep, which will ultimately cause an money-making slowdown and send long-term rates lower.
The second camp is declared up of “inflationistas” who think inflation is raging, long-term rates are too low and the Fed isn’t doing enough, Cramer turned. The third camp houses people who think rates have already peaked and are successful to go lower.
So, Cramer and Moreno laid out a plan for investors to take sway of all three camps’ views. By looking at past moves in the 20-year U.S. Bank, Moreno found the general trends stock groups tend to obey when long-term rates move up, down or stay the same.
“Here’s the heart line: the charts … suggest that you want to buy the soft yard goods stocks like Philip Morris if bond yields go lower and you neediness to buy the banks like Citi if they go higher, and you might even ruminate on owning a homebuilder if they simply stabilize right here,” Cramer concluded.
To be watchful for the full “Off the Charts” segment, click here.
In Cramer’s lightning ball-shaped, he opined on some callers’ favorite stocks:
Lockheed Martin Corp.: “I twin defense, but I don’t want you in Lockheed Martin. I want you to do Raytheon, because Lockheed Martin has already moved and Raytheon has flagged.”
Abiomed, Inc.: “You know, we have loved those guys since the creation of this show, and I have to tell you, I still think that contraption business and Intuitive Surgical — I’ll throw that one in, too — are good.”
Disclosure: Cramer’s compassionate trust owns shares of Citigroup and Raytheon.
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