Jim Cramer says stocks should be prepared for further declines but open to opportunities

The stock market just came off a rough week, but CNBC’s Jim Cramer says the pain won’t end soon.

The inverse relationship between oil and stocks will become even more important as few major corporate earnings or economic data releases are scheduled for next week. It’s almost a given these days that stock prices will fall when oil prices rise. This situation has been going on since the United States and Israel first attacked Iran about three weeks ago.

Cramer said the war had taken on an “unbridled nature” as President Donald Trump pivoted from talks to reduce military operations in the Middle East to reports that he would send thousands of troops to the region.

The market has been keeping an eye on every development in the area. During Friday’s session, Dow Jones Industrial Average and Nasdaq It has entered correction territory, defined as a decline of at least 10% from recent highs. Both ended significantly lower, but above that threshold. of S&P500The stock also fell on Friday, but has improved somewhat recently, dropping 7% from its recent high. All three benchmarks posted their fourth consecutive week of losses.

Brent crude, the international oil benchmark, rose more than 3% on Friday to $112.19 per barrel, its highest level since July 2022. It rose a further 8.8% for the week.

“It’s very difficult to think about what to do with stocks given the skyrocketing oil prices, but you don’t want to give up your stock in a good company for something that theoretically could be done with a phone call,” Cramer said on Friday night’s “Mad Money” show. “But if the goal is to reopen the Strait of Hormuz, it won’t be easy. It will require either tremendous escalation or a diplomatic breakthrough. And I think the latter is unlikely.”

“We have no idea what’s going to happen here. We know wars are bad for stocks. The economic impact is global. It seems like every positive comes with two negatives, but every positive just seems to make sure it doesn’t get too sold off to cause a legitimate rebound,” Cramer said.

With this preparation in place, Kramer turned his attention to next week’s corporate earnings.

KB Homethe national homebuilder is scheduled to report earnings on Tuesday. Mr. Kramer said investors should have some insight into the struggling housing sector. He expects “sales will be slow” this quarter as mortgage rates remain high. “Despite inflation from rising energy costs, the main reason I think the Fed should hold off on cutting rates is the weak housing market,” Cramer said. “There just aren’t enough transactions happening, and home sales can play a huge role in giving this economy the boost it so desperately needs right now.” On Wednesday morning, uniform suppliers will release their quarterly results. Cintas and payroll service companies Paychex Kramer said both are high-quality companies with underperforming stocks. Cintas stock should rebound after the deal is completed. uni firsthe said. Paychex stock is under pressure ahead of earnings due to concerns about disruption from artificial intelligence. “In this stock, the longs and the shorts are shadow boxing. We don’t know who will win,” he added. carnival Earnings are Friday. Mr. Kramer said Wall Street appears to be becoming more positive about cruise lines, despite weaker results. “While stock prices are weak and unaffected by rising fuel prices, Carnival is seen as a worthwhile vacation, which seems to be rather rare these days,” he added.

Cramer said the key takeaway for investors as they look ahead to the new week is that a tough market can also be an opportunity to buy selectively. “We can say that prices are starting to fall in some industries, such as banking, food, pharmaceuticals, retail, and in some cases big tech companies. So as oil prices rise, there is a very good opportunity to buy quality stocks at reasonable prices,” he concluded.