The markets "deserved to get hit today," Jim Cramer told his Mad Money viewers on Tuesday evening.
The ISM September PMI result rang in at 47.8%, the lowest reading since 2009. So of course investors are going to freak out over the number and start worrying about a recession, he reasoned.
Even though China is starting to hurt and Europe's economy is struggling, the U.S. is still doing pretty well, Cramer said. We're not heading back to 2009's economy, he insisted, arguing that the U.S. is mostly a services-based economy, not an export economy.
While he doesn't buy into the belief that a recession is reading its ugly head, he said there are some rational reasons for the pullback.
He pegged profit taking as the first culprit, right ahead of a market exhausted by recent IPOs. The latest highlight is Peloton, (PTON) - Get Report which continues to tumble after pricing shares at $29 last week. The stock closed at $21.51 on Tuesday.
Worries over earnings could have an impact, although Cramer said he's not losing sleep about the upcoming results. Political concerns continue to grip Wall Street, ranging from the trade war and Trump's impeachment to Elizabeth Warren winning the next election.
The bottom line? Pump the brakes and don't panic, he told investors. Instead, those who have been raising cash should start looking at buying opportunities in the market.
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Off the Charts: McDonald's, Chipotle, Jack in the Box
The stock market has been brutal lately, which make stock picking even more important. In his "Off the Charts" segment, Cramer checked in with colleague Bob Lang, a respected technician for the Trifecta Stocks newsletter at TheStreet, as well as the author of "Know Your Options."
Lang took a closer look at several fast-food stocks, starting with McDonald's (MCD) - Get Report . McDonald's has been a very good buy-the-dips candidate, but recently fell below its 50-day moving average.
However, the momentum-measuring MACD reading just turned bullish, while the technicals also suggest an overbought condition. Shares look due for a bounce, Cramer said.
As for Chipotle Mexican Grill (CMG) - Get Report , shares have been on fire. CMG is up more than 90% for the year, and is now a possible breakout candidate. Resistance comes into play near $850. Over that, and bulls can see a big-time breakout, although it may take time to develop, Cramer said.
Finally, Lang took a closer look at Jack in the Box (JACK) - Get Report . While the stock remains overbought from its post-earnings gap-up in August, it shows that demand remains strong for the stock. Plus, Jack is forming an ascending triangle, a bullish technical pattern where rising uptrend support continues to push the stock price into a static level of resistance. If shares push ahead over resistance, Jack stock can continue higher.
But Can They Deliver?
On the show's "No-Huddle Offense," Cramer wanted to take a closer look at McDonald's, which fell 2.65% on Tuesday.
Hitting the stock was a research note from JPMorgan analysts, saying that same-store sales would be disappointing this quarter. The analysts confident that estimates are too high for the quarter, Cramer said. McDonald's is losing market share to competitors and delivery will not be as impactful as investors hope.
This is a tough call, Cramer said, pointing out that the analyst still has a buy rating on the stock. For his part, Cramer agrees that McDonald's stock is a buy. But that's part of the problem, as almost every analyst has a buy rating on McDonald's. That means it could get hit by downgrades at some point.
If you're a long-term investor in McDonald's, Cramer suggests riding out the possible storm.
However, those looking for a possible restaurant stock to buy with momentum, consider Chipotle. For all the technical reasons covered earlier in the show, Cramer also highlighted the company's efforts in delivery, new menu products to drive growth and portfolio managers' itch to own the year's best-performing stocks.
Executive Decision: Consolidated Edison
McAvoy explained that utility stocks generally have an inverse relationship to interest rates, particularly long-term rates. When rates are in decline, utility stocks generally perform well. But the knife cuts both ways, he said, and when rates rise, utilities can struggle.
Cramer said it looks like we're in a falling rate environment, and he has previously called Con Ed "the utility stock to own."
McAvoy said that transitioning to the clean-energy economy provides significant opportunities, benefiting the customers as well as the environment. He pointed out that the company has several energy efficiency solutions. For instance, Con Ed has a product for electric car users, which incentivizes them with a discounted rate for recharging during certain times.
McAvoy also championed the dividend, noting that Con Ed has raised its dividend for 45 consecutive years. That's the longest stretch among S&P 500 utilities.
Don't Look to China for IPOs
Stocks took a beating Friday on worries about escalating trade tension between the U.S. and China. While those worries seemed to cool over the weekend, Cramer took a closer look at some Chinese IPOs.
These new issues have been total duds, he said, with the average Chinese IPO from 2018 and 2019 down 32% from the offering price. Only three of the 31 IPOs from Chinese companies in 2018 are above their IPO price.
China doesn't have regulations that are as strong as those in the U.S., and companies don't follow the same disclosure rules that public U.S. companies follow. That puts small investors at risk of being burned and, as a result, makes these stocks riskier propositions.
Cramer said he'd be a seller of Chinese IPOs if investors are holding on to them. The last thing the U.S. needs is more low-quality Chinese IPOs, which should be blocked, he argued.
Whether they're allowed or not -- and Cramer said his stance has nothing to do with the trade war -- investors have a choice and they should just say no to Chinese IPOs.
On Real Money, Cramer keys in on the companies and CEOs he knows best. Get more of his insights with a free trial subscription to Real Money.
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At the time of publication, Cramer's Action Alerts PLUS had no position in the stocks mentioned.