Home Depot, at 20x earnings, could easily trade down to $70 if it doesn't have a pretty darned good quarter. So could Wal-Mart ( WMT) if that happens. This group, to me, is in trouble. It's ridden the refinance and housing boom for ages. Those are over. These stocks will not be bailed out by an improving Europe or Asia. They will only be hurt by Washington when the summer's over. Puts anyone? At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, had no positions in the stocks mentioned.The Piper Is Being PaidPosted at 11:57 a.m. EDT on Thursday, Aug. 15 You don't want rates to climb at the same time earnings are coming down. You want rates to climb because earnings are going higher. You don't want the consumer spending less and the 10-year note going to 3%. You want consumers spending more and the 10-year going to 3%. So what we have right now is a combination that should, unfortunately, if you are a bull, take us down to let's say 1643 on the S&P 500, give or take a point (thank you Matt Horween for your levels.) It's too difficult to shrug off both Cisco ( CSCO) and Wal-Mart ( WMT) on the same day. I can excuse Cisco, as I did earlier, by simply pointing out that there really is no big guide-down and plenty was robust. Wal-Mart's tougher, especially in light of Macy's ( M) miss yesterday. You can't have the biggest department store miss and the largest retailer in the world miss and not think that the boogeymen of higher taxes, higher gasoline prices, unemployment insurance, rising rates, furloughs and the sequester aren't at last dinging the strong consumer. We know the housing stocks have been clocked despite incredible -- and ridiculously high -- homebuilder sentiment, the strongest since 2005. Boy is that worrisome. We also know that auto sales simply can't be as robust as they have been with higher rates and lower disposable income. Where is the leadership going to come from? I can't find any to speak of. Very worrisome. The piper's being paid.
The macro numbers, like weekly claims, justify the higher rates even as we can't find enough business activity at the enterprise or micro level to justify paying higher price-to-earnings ratios for stocks. Higher rates mean lower PEs, and that means the PEs for the market are too stretched.