CNBC’s Jim Cramer on Tuesday said the market is ready for a pullback because many stocks, including tech companies touting artificial intelligence initiatives, have climbed too quickly without a solid basis for doing so.
He said Tuesday’s action — with the Dow Jones Industrial Average slipping 0.62%, the S&P 500 declining 0.37% and the Nasdaq Composite dropping 0.19% — is a good start.
“While I’m not a bear, we have way too many stocks that have gone parabolic, meaning they’re straight up, and they’re going straight up on nothing,” Cramer said. “They just keep rising as one analyst after another raises their price targets and really nothing more,” he continued.
Cramer said companies that make software to sell products, as well as ones that measure or analyze data, are seeing this “parabolic” action, even though nothing has happened to warrant such gains.
While he said he’s not rooting for the downfall of the “Magnificent Seven” tech stocks, they need to “rest up” unless new legitimate information crops up to propel them forward. Cramer said there are many players in the sector whose continued claims of future AI-driven success may just be lip service.
“No matter what, you just can’t have the same stocks go up and up and up on the same old news, and as I see it, that’s what’s happening — momentum and multiple expansion,” he said. “Any stock that’s gone parabolic is a candidate to decline here.”
He also suggested that much of the market’s rally stems from the Federal Reserve’s decision to pause interest rate hikes. Some investors believe this pause means the economy is cooling and there are rate cuts on the horizon. But comments from the Fed’s Christopher Waller on Tuesday hinted at a less aggressive approach to rate cuts this year.
Cramer said the Fed doesn’t yet have inflation completely under control and that the organization needs to truly beat inflation before it can cut rates. He also mentioned that rising oil costs are affecting pricing across the board,…
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