Key Points
- CNBC’s Jim Cramer said the market appears too complacent given the escalating conflict in the Middle East, rising oil prices, higher interest rates, and increasing AI spending.
- “I’m struggling to have reasons to buy, and I certainly have a lot of reasons to sell,” he said on “Squawk on the Street” on Thursday.
CNBC’s Jim Cramer cautioned that Wall Street may be underestimating a growing list of risks facing the market, including resurgent oil prices and heftier spending on artificial intelligence. “I’m struggling to have reasons to buy, and I certainly have a lot of reasons to sell,” he said on ” Squawk on the Street ” on Thursday, before the market open. The major Wall Street averages opened lower and selling pressure intensified early in the session. The Dow Jones Industrial Average lost over 400 points, while the S & P 500 fell more than 1% and the tech-heavy Nasdaq Composite dropped about 2%. It would mark the fifth decline in six sessions for both the S & P 500 and Nasdaq. Even so, Cramer noted the market has held up better than many would have expected. As of Wednesday’s close, the S & P 500 was down just 1.5% from its June 2 record closing high, while the Nasdaq was off roughly 5% from its own record close on June 2. The blue-chip Dow most recently closed at a record on July 6 and entered Thursday about 1.6% below that level. “That parade of horribles … would indicate that we’ve got to be pretty substantially off the highs, but we’re not,” Cramer said. Chief among those concerns is oil, Cramer said. International benchmark Brent crude surged more than 6% Thursday, topping $100 a barrel, after Yemen’s Iran-backed Houthi militants claimed attacks on two Saudi Arabian oil tankers in the Red Sea, fueling fears the conflict could broaden. Oil prices also climbed after President Donald Trump warned the U.S. would retaliate and bomb Iranian infrastructure. Both Brent and West Texas Intermediate crude were trading at their highest levels since before the U.S. and Iran agreed on an interim deal to bring their war to an end last month. The jump in crude added to inflation concerns, pushing the 10-year Treasury yield to its highest level since January. A sustained rise in energy prices complicates the Federal Reserve’s path toward lowering interest rates later this year by reigniting inflation pressures. Higher levels of inflation typically increases the likelihood of a rate hike, which can weigh on economic growth and stock prices. Indeed, the U.S. central bank’s policy committee is set to meet next week, and the probability of a rate hike has increased sharply in recent days. According to the CME FedWatch tool , the market assigns a 38% change of a quarter-point increase at the meeting, up from just 12% a week earlier. “Are we kidding ourselves?” Cramer said. “We have oil … We have interest rates … We just don’t have the horses to continue higher right now.” Cramer said Alphabet’s quarter underscored another risk he is watching: the enormous cost of the AI buildout. While he said the company reported a “good quarter,” he questioned how long companies can continue funding AI at the current pace. Alphabet recently announced plans to raise roughly $85 billion through stock sales , on top of an increase in debt issuance this year. Cramer’s Charitable Trust , the portfolio run by CNBC’s Investing Club, owns shares of Alphabet. “I just don’t know where [additional funding is] going to come from,” he said. “I think that the corporate bond market is the first one that’s going to say, ‘We’ve had it.'”